WHILE the administration of President Rodrigo Duterte has moved with admirable speed to put an end to the contemptible form of labor exploitation known informally as “endo” (end-of-contract) in the Philippines, over the weekend the Employers’ Confederation of the Philippines (ECOP) expressed alarm that job contractualization itself is under threat. The matter concerns something that could cause grave harm to the country’s job creation efforts. It is a valid concern, and one that our lawmakers should heed carefully.
“Endo” refers to the practice by employers of hiring employees for a short period, typically five months, then terminating and rehiring them to skirt the stipulation in the Labor Code that an employee who has worked for at least six months is considered a permanent employee, and thus, eligible for benefits such as social security and PhilHealth contributions, and 13th-month pay.
Under Department Order 18-A from the Department of Labor and Employment (DOLE), repeated hiring of employees under an employment contract of short duration or service agreements of short duration with the same or different contractors is prohibited, and for good reason. The practice, which is done solely as a cost-cutting measure, exploits the worker by denying him the benefits of regular employment.
ECOP’s Honorary President Rene Soriano minced no words in expressing the sentiment of his group toward the practice of “endo,” saying over the weekend “it deserves the scorn heaped upon it.”
Unfortunately, Soriano said, the clearly prohibited practice of “endo” has been conflated with the practice of contractualization in general, which is neither illegal nor necessarily bad for workers. In fact, Soriano stressed, growth of the service-contracting sector since the 1960s has been a key driver of job growth in the Philippines, and provided employment opportunities that might not have otherwise been available.
Contractualization is very useful for employers, particularly those whose business varies seasonally, or who are in volatile sectors—Soriano mentioned export-dependent businesses as an example—where staffing needs can change quickly depending on market conditions. It is also useful for “back office” functions in many businesses, hence the rise of the business process outsourcing (BPO) sector.
Indeed, the practice is susceptible to abuse, but two big steps that can be taken to prevent much of the exploitation that has given contractualization a bad name. First, a worker’s time on the job should be connected to the labor supplier, not the contracting business; in other words, an employee registered with a labor pool for the required length of time (currently six months) should be eligible for permanent employee benefits, even if he or she has worked at multiple jobs in that period. That, of course, shifts the burden of providing benefits to the labor supplier rather than the business where the employee is working, though there are ways of defraying the extra cost. Second, the current six-month guideline for establishing permanency of employment ought to be reduced to perhaps three months, to reduce good workers’ time to wait for benefits of regular employment.
If the practice of endo is to end, greater efforts to encourage businesses to offer more regular, permanent employment must be made. Banning contractualization altogether is not a solution, however; it will only hurt workers by reducing job opportunities, and ultimately, harm the economy as a whole.