STOPPING “endo”–an acronym for the “end-of-contract” employment scheme–was a popular campaign platform during the last elections. Now with President Rodrigo Duterte at the helm, he has vowed to take on “endo” like he did his war on drugs, with this warning: “Stop labor contractualization or I kill you.” But that’s just hyperbole, he later clarified, to the nervous laughter of businessmen.
“Endo” refers to the practice of hiring workers on short-term contracts, usually five months long, or a month shy of the six-month threshold where a worker would be considered a regular employee under Philippine labor law. Some companies terminate and then rehire the same worker every five months, a form of “endo” known as “5-5-5,” in order to circumvent the Labor Code’s provisions on employment security.
But prohibiting contractual labor is not only impractical, it is also an oversimplified approach to the complex problem of irregular employment, underemployment and unemployment.
First off, there are some jobs or industries where permanent employment is simply not feasible. Take the case of the construction industry. A construction company, for instance, customarily hires masons, plasterer, painters, carpenters, electricians, plumbers, etc. only for the duration of the construction. Once the building is completed, the workers’ employment ends, too. It would obviously be foolhardy for any contractor to continue employing laborers if there’s no construction work to be done.
Even the labor chief admits that totally eliminating contractualization would be very hard for the business sector. “You have to allow some forms of contractualization. For example, if you are a shipbuilder, when you build a ship, you employ not less than 10,000 workers to build a ship. [When the ship is finished, what will you do with the 10,000 workers?] If you continue to hire them, [you will go bankrupt],” Bello said.
The primary task for the labor department therefore is to spell outclearly what kind of contractualization is legal and illegal, and if need be, enumerate prohibited labor contracting work or permissible contractual jobs–on a per industry or sector basis–in order to prevent any misinterpretation or circumvention of labor rules and regulations.
But more importantly, the Department of Labor and Employment (DOLE) must address the root cause of why this “endo” scheme has become so prevalent.
We’ve talked to some well-known businessmen (who all chose to remain anonymous for obvious reasons) and they all offered a common explanation for this “endo” phenomenon: It’s easy to hire but it’s so difficult–and expensive–to fire an employee, especially a regular employee.
They point out that a dismissed employee, even those allegedly terminated for just and valid causes, usually end up filing a labor case against the company. The employer ends up either incurring sizeable litigation expenses in order to defend itself, or shelling out a big amount to settle the case and avoid amore costly lawsuit. In fact, there are studies that peg the employer’s average “cost of firing” at around P40,000 per worker.
There appears to be some basis for this explanation.
According to the World Bank’s October 2016 Philippines Economic Update, “the high cost of terminating permanent contracts gives employers a strong incentive to use fixed-term, project-based or seasonal contracts, which are much easier and cheaper to terminate.” Temporary employment contracts allow employers “to terminate workers without incurring the administrative and monetary costs involved in the formal termination process,” the WB report added.
But even if contractual labor is totally outlawed, it will not bring the desired result sought by many of our workers. Why? Because a majority of the country’s workers are employed in the “underground economy,” or the so-called informal sector.
These are workers who are employed by small enterprises that are usually unregistered, unrecorded, and unregulated by the government and do not comply with labor standards on minimum wage, hours of work, employee benefits, or security of tenure.
The March 2014 WB report estimates that 75 percent of workers (or 3 of every 4 wage-earners) in the country–equivalent to around 28 million Filipinos–are informally employed with little or no protection from job losses or opportunities to find gainful employment.
The country’s irregular employment, underemployment and unemployment numbers are bound to get worse, especially with overseas jobs in the Middle East drying up. The crash in oil prices has forced companies to lay off thousands of Filipinos, some of them still unpaid and stranded in the Gulf States. Those lucky enough to return to the country find that there are very few good jobs available to them.
Compounding our unemployment problem is the weakening of another cornerstone of overseas employment: merchant and cruise ship jobs. BangkoSentral data show that demand for Filipino seafarers–who make up about one-fourth of the 1.5 million seafarers worldwide–fell 44 percent in January to July from a year earlier.
While eliminating “endo” may appear to be the best option to improve the lives of millions of Filipino workers, it is unlikely to solve the country’s labor woes. The better solution is to find a balance between improving the conditions of employment and generating more (and better) jobs, and enticing small and medium enterprises (SMEs) to go mainstream. This means making it easier for SMEs to comply with labor, tax and LGU regulations and giving them more flexibility in hiring and firing workers.
There are several proposals worth studying such as higher minimum wages for temporary workers, relaxing administrative procedures for termination, protecting employees via separation pay (the amount of which increases with the worker’s length of service), and limiting labor cases to discrimination or violation of certain workers’ rights.