Recto law grants more incentives to MSMEs

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ONE of the more serious problems the Philippines is facing is the high rate of unemployment. With the lack of opportunities for new graduates, the number of jobless individuals continues to rise annually.

Lawmakers particularly in the Senate have been doing their part to address unemployment through proposed legislation that would lead to jobs generation and also promote employees welfare.

Since the 16th Congress opened in July there have been many proposed bills filed by senators related to employment one of which was introduced by Senate President Pro Tempore Ralph Recto, which centers on the micro, small and medium enterprises (MSMEs) in the country.

Recto’s Jobs Act of 2013 is a proposed bill which aims to promote job generation by providing additional incentives to more than 900,000 MSMEs in the country.


The Senate’s number two man expressed belief that there is need for the country to harness the job creation potential of MSMEs by providing them with wider elbow room for growth through expanded incentives and lesser stringent national and local registration requirements.

He said that with a ballooning army of unemployed, MSMEs could deliver the significant batch of “able bodies” required to plug the unemployment problem.

“The strong army of entrepreneurs falling under the MSMEs sector has the potential of significantly addressing the unemployment problem that has the combined wallop of a corporate giant’s total workforce if the jobs to be created (by MSMEs) are put together,” he said.

Based on the data of the Department of Trade and Industry (DTI) MSMEs generated a total of 3,872,406 jobs in 2011 while large enterprises employed 2,473,336.

The figure indicates that MSMEs contributed almost 61.0 percent of the total jobs generated by all types of business establishments that year.

Micro enterprise generated 28 percent, or 1,778,353 jobs that year while small enterprises produced 25.9 percent, or 1,642,492 and 7.1 percent, or 451,561 by medium enterprises.

But the senator lamented that even with the existence of laws like Republic Act (RA) 6977, or the Magna Carta for Small Enterprises; RA 9178, or the Barangay Micro Business Enterprises Act of 2002; and R.A. 9501, or the Magna Carta for Micro, Small and Medium Enterprises, the growth of MSMEs is still slow with the wide-array of bureaucratic hurdles that small businessmen have to pass through.

This is the reason why would-be legitimate MSMEs chose to stay “incognito” or remain underground just to evade the tedious process of complying with local and national regulatory and registration requirements.

He said aside from freeing them from cumbersome bureaucratic red-tape, MSMEs should be enticed to expand their payrolls by hiring additional workers and get “allowable deductions” in return.

Recto proposed that micro-enterprises that have assets up to P5 million like “sari-sari” stores be exempt from income tax, minimum wage law, value-added tax (VAT) registration and percentage tax to fully harness their growth and job creation potentials.

Under the proposal micro-enterprises need only to register with the city or municipal treasurer to be formally enlisted as an “MSME” while small and medium enterprises (SMEs) will have to register with the Department of Trade and Industry (DTI) to avail of incentives and benefits.

SMEs, whose assets are between P5 million to P15 million for small businesses, and P15 million to P100 million for medium businesses, would also be exempt from registering as a VAT entity but only if their annual sales do not exceed P3 million.

SMEs could also enjoy lower income tax for a period of five years if they would hire a maximum of two new workers for an allowable tax deduction of P40,000 for each worker or a maximum of P80,000 for two employees.

Recto hoped that his proposed package of benefits to MSMEs would be included in the list of priority legislations that would be submitted by the President to the Legislative Executive Development Advisory Council (Ledac) that would be convening by the end of the month.

Discrimination
One of the factors that contribute to the country’s high unemployment rate is the emerging discrimination in employment based on a person’s age and this is the reason why Senator Pia Cayetano introduced Senate Bill 29, or the Anti-Age Discrimination in Employment Act of 2013.

Cayetano proposal seeks to eliminate age discrimination in employment by prohibiting and penalizing any employer, labor contractor or labor organization that will discriminate against any individual on the basis of his or her age.

The senator insisted that the basis for employment should be a person’s knowledge, skills and qualifications which are necessary to perform a job and a person’s age should not be an issue.

The measure seeks to prohibit employers from the private sector as well as the national and local governments to print, publish any notice of advertisement relating to employment suggesting preferences, limitations, specifications and discrimination based on age.

Cayetano also wants to prohibit employers from requiring applicants to declare age or birth date during the application process and decline any employment application because of the applicant’s age.

The bill also forbids companies from basing employees compensation, terms and conditions, privileges, promotions and other opportunities on their age.

“You would think that this is an issue affecting senior citizens, but no, even those in their late 20s are already discriminated against,” she pointed out.

Senator Miriam Santiago on the other hand wants to focus on the condition of the so called project employees who according to her are frequent victims of unfair labor practices.

Project employees, according to Santiago are those employed in connection with a particular project or phase whose employment is coterminous with each project or phase of the project to which they are assigned.

In filing Senate Bill 1705, Santiago seeks to amend article 280 of the labor code which defines project employees as an exception to the rule on regular employment.

She said while the said article assured any employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee, the problem arises when the project employee continues working for the same employer even after the completion of the project.

Santiago said that the usual defense of the employer is that the employee cannot receive the benefits of a regular employee for the reason that the employee was hired only as a casual employee.

Under her bill, project employees who have become regular employees shall enjoy security of tenure in their employment as provided herein. Only project employees who have become regular shall be entitled to separation pay, unless terminated for just cause.

These are just some of the proposed legislation that not only aimed at generating jobs but also ensure the protection of workers against possible abuse on the part of the employer.

The said bills have been referred to the Senate Committee on Labor, Employment and Human Resources Development chaired by Senator Jose “Jinggoy” Estrada, and are waiting to be tackled by the committee.

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