BRYAN L. RAPADAS
Divine Word College
of Laoag
Abstract
The
growing uncertainty and insecurity in the labor market are causing an alarm
over the past years. Increasing unemployment and temporary employment
arrangements worsen working and living conditions. This includes the
contractual employees have to endure a hazardous, uncertain, and irregular working
environment. Economic and financial challenges have caused widespread concern
among workers. Often, statistics reflect only unemployment, but it fails to
present that most people face a predicament who has work but do not have a
decent occupation, a reasonable salary, security of tenure, social protection,
and access to benefits and rights. The gravity of the problem requires a
harmonized and systematic solution at national and global levels
According
to ILO Philippines (2017), precarious employment is described as a short-term
or seasonal, or casual job, including fixed-term or temporary employment
contracts and subcontracting arrangements.
This employment is disturbingly increasing not only in the informal
economy but as well as in the formal economy.
Temporary employment is a serious threat to workers' rights to security
of tenure, labor standards, job-related safety, and health, join labor unions,
and social protection. Contractual
workers are hired to do the organization's vital work but are deprived of
permanent employee rights. Many companies and organizations moved the gears
towards temporary employment contracts through manpower services agencies and
short-term or independent contractors instead of practicing permanent
employment.
Contractualization or more popularly
known here in the Philippines as the "Endo" or "end of
contract" or "5-5-5," is very much a contested form of
employment in the country and even internationally. Workers get hired not more than five months,
so employers are not obliged to hire them as permanent employees on the sixth
month as required by the Labor Code. It deprived contractual workers of all the
rights and benefits granted by labor law to permanent employees. Due to legal
loopholes surrounding the practice, Filipino workers' exploitation persists
despite being declared illegal. Contractualization caught the attention of
labor groups and political leaders, including President Duterte. Remember that
during the election campaign of President Duterte, he promised to end the
abusive labor practice endo. However, it
seems the conclusion has not yet come. The President certified the bill as
urgent and sought to fulfill his promise, and eventually, he declined to sign
the Security of Tenure (SOT) bill on July 26, 2019 (Santos, 2019). On December
1, 2020, the security of tenure bill was re-filed by the House of
Representatives, which would ban labor-only contracts but would still allow
justified and reasonable job contracting and fixed-term employment (Cepeda, 2020).
This article will tackle how contractualization began, its adverse effects, why it
is happening, some advantages, possible effects of ending contractualization, and some key elements to prevent the
progression of contractualization.
Keywords:
endo, contractualization, business ethics, precarious work, temporary contract
Introduction
Paqueo
& Orbeta (2016) defines contractualization as generally practiced in the
country and refers to a non-permanent form of employment mutually agreed in a
contract by employee and employer through direct hiring or manpower service
agency. Most labor groups have claimed
the practice violates the employees' rights and wellbeing. ILO (2011) added
that contractual worker, includes the following forms: temporary employment
contracts, hired through third-party manpower services agencies, subcontractors
and workers declared themselves as self-employed even though they are reliant
on and incorporated into the organization for which they fulfill the tasks.
According
to ILO Philippines (2017), Contractualization is characterized by employment
term uncertainty and insecurity; multiple employers and vague employment
relationship; a dearth of social protection and benefits; low pay; and freedom
in joining a trade union and bargaining collectively.
Furthermore,
ILO (2011) also emphasized that, while the term precarious work is commonly
used internationally, its definition remains ambiguous and complex. The
severity of precarious work and other forms depends on the context of the country
and its economic and social structure of the political systems. This resulted
in several terms emerging from particular national contexts, such as temporary
employment contracts, contractual employment, and contract of services. Forms
of precarious work appear to be continually increasing, as employers regularly
find alternative means to take advantage of the loopholes in regulations to
boost their business's profitability at their employees' expense.
The
European Metalworkers Federation (EMF) utilizes the term from a more extensive
perspective: Precarious work is described as an atypical form of employment
with low pay, no security of tenure, and inability to meet a living standard.
Public Service International (PSI) holds that precarious work has indirect or
vague employment with uncertainty and insecurity in the forms of restricted
contract, temporary, employment-agency, casual, part-time, and seasonal
contract with pseudo-self-employment. The International Metalworkers'
Federation added that in Africa, precarious work is ordinary: four factors
describe precarious employment: 1. employment security; 2. the ability to join
trade unions which translates to authority to working conditions and autonomy; 3.
the presence of mandated labor law protection; and 4. adequate salary to enable
employees to enjoy a satisfactory standard of living. (ILO, 2011).
According
to ILO (2011), as mentioned during the ILO Bureau for Workers' Activities
(ACTRAV) Symposium, they identified two categories with corresponding
conditions covering most of the adversely affected employees' precarious work
arrangements:
Contractual
arrangements
i.
Restricted continuance of contract
(fixed-term, short-term, temporary, seasonal, day-labor, and casual labor)
ii.
Vagued employment arrangement (triangular and
disguised employment, bogus self-employment, subcontracting)
Precarious conditions
i. Low pay
ii. No due process of employment termination
iii. Deprivation to social protection and benefits
iii.
Workers unable or limited to practice labor
rights
How it Began in the Country
Ten
years after implementing the Marcos regime's fare situated procedures,
joblessness and underemployment trends caused unsteadiness in the public
economy (Pasquin, 2018). The intense rivalry among industry players has
prompted the shutting down of certain organizations that can no longer adapt to
the competition's pace at the initial execution of streamlined commerce amid the
1980s. According to Macaraya (1999), those who were able to continue doing
their business regardless of the economic changes recovered by making
adjustments in their operations by taking advantage of technology innovations
and an adaptable workforce. Using Herrera Law as a reference, contractualization
then became a common practice and customary in the country. The late Senator Ernesto Herrera introduced
labor contracting by authoring revisions in 1989 to the Labor Code. By
including a bill mandating the regularization of employees who have rendered
six months of continuous service, others claim that companies were allowed not
to regularize employees and rehire them after laying off for five months
(Fernandez, 2016), though not without abuses as the unintended consequences.
The Negative Effects of Contractualization
No security of
tenure. The
normalization of precarious employment shows its intensely damaging
consequences on society. It gives workers and communities uncertain and
vulnerable situations, obstructing their life planning options. (ILO, 2011).
With
the critical focus on the flexible purpose of employment, contractual have no
security of tenure, due to the nature
of their work and employment, they are quickly hired and can be easily fired,
especially to the low-skilled workers, which can be easily replaced, performing
only peripheral functions to the firms' main objectives.
Workers
on temporary contracts may profit in the short term but will have to endure a
risky situation in the long run due to contract renewal uncertainty. Temporary
contracts are often linked to low pay and do not give the same benefits as the
regular employees, which often accumulate as time goes by and are related to
the employment tenure and status. As a result, workers will have challenges
planning for their future (ILO, 2011).
Addison
& Surfield (2009) also added that precarious work prevents employees from
committing to their long-term plan for their lives due to unstable employment.
In particular, temporary workers will have challenges getting married, having a
family of their own, or building their own house due to their contracts'
uncertain continuity and low wages.
Researches
discovered that contractual employees and even those inflexible employment
desire a clear and rational life plan are exceptionally high. In the context of the need for stable career
paths, if an employee has only two choices, such as joblessness or temporary
work, temporary work is preferred. However, the study additionally shows that a
significant part of the apparent "advantage" of temporary work,
broken career path is undesirable.
Income security. According
to Li Kungang (2010), if the company violates employees' rights by not giving
overtime pay and remitting social insurance premiums, the contractual worker
has no choice but to take it because it might cause the non-renewal of his/her
contract. ILO (2011) also added that precarious work has been causing the low pay
sector's upsurge. In countries without the full support of labor unions and
mandated minimum pay, the descending trend in wage rates is exceptionally high
during joblessness periods. People have no option but to take precarious jobs
for mere survival even without social protection.
Lack of clarity. Another
issue discussed by Fudge (2006) about
contractualization is the ambiguity regarding the employer's information. The involvement of subcontractors,
franchisers, and agencies in the arrangement made it more complex. The legislation
was not able to follow organizational adjustments, it failed to distinguish
complicated multidimensional and the traditional simple mutual relationship
between an employee and employer. ILO
(2011) added that workers hired by a manpower agency but who work for a
detached entity are at risk because it is uncertain from the two parties, which
are in charge and answerable for a worker's privileges and welfares. Due to
weak labor law enforcement, it causes a trap to the workers in triangular or
disguised employment, preventing them from protecting their rights. Through
these practices, companies avoid their duties and responsibilities as
employers.
No trade union
rights.
Most contracts of services are not allowed to join a labor union, or if they
are allowed, they are afraid to voice out their concerns because their contract
can be terminated anytime. Limiting contractual workers from joining a labor
union is one way of depriving them of raising their concerns, priorities,
grievances, defending their interests, and engaging in negotiations and
discussions with the employer. They are being suppressed to exercise their
right of freedom of choice.
Because
of distress and uncertainty, workers are discouraged from joining labor unions,
aggravating their vulnerability to precarious work arrangements. Workers are
also discovered more likely to experience work-related safety and health issues
(ILO, 2011).
The
workers have considerable leverage to influence working conditions under
potentially dangerous circumstances through a labor union. Unions typically
emphasize keeping workers healthy, injury-free, and wellbeing.
No paid leaves. The situation is aggravated because the contractual does not have paid leaves (for
vacation and sick leave) but are subject to sanctions for tardiness and
absences. They are in a no-work, no-pay arrangement. In particular, women find
themselves more disadvantaged as service contractors because they are not
granted paid leaves either for childbirth/-care, elderly care, or other
domestic responsibilities.
Lack of security and social
protection. Job Orders (JOs) and contractual workers do
not enjoy of having benefits such as social protection, 13th-month pay,
personnel economic relief allowance (PERA), cost of living allowance (COLA). It
is the workers' personal decision to have their social benefits and pay the
premiums from their pocket.
Health and safety
risks. According
to Benach & Muntaner (2007),
temporary work employment is linked with poor health and wellbeing situations.
Employees are mostly exposed to risky work environments, stressful
psychological and social working environments, and work overload. Research also
discovered that contractual employees have the tendency not to get proper
preparation for the work they do and that regulatory bodies do not regularly
monitor their occupational safety and health.
Quinlan (1999) also added that the
employment relationship's precarious nature could poorly affect the worker
emotionally and psychologically. Workers are pressured to accept the work, even
their wellbeing and security are at risk. Subcontracting is also one way for
companies to shift the responsibility by contracting out dangerous jobs, giving
precarious workers the burden of more hazardous tasks. In most countries, bogus self-employed
workers do not receive any assistance from employees' compensation or health
insurance risking long-term unemployment if they get injured or sick.
Negative social
impacts. The problem in democracy caused the underprivileged to feel powerless, underestimated,
and no control over their own lives. This statement can stress that complete
powerlessness means ending to be an independent individual. The feeling of
restraint of a person to choices and fulfillment fuels the notion of defeat.
The youths' frustration in deprived metropolitan areas does not have
respectable jobs, causing them not to be hopeful for their future, lives,
being, career and leading them to constant fiery rebellions. (ILO, 2011)
Precarious
work has remarkably deteriorated the stability of society. The feeling of
weakness and fear of adjustment cause workers to lose their confidence from
joining labor unions and community organizations. In times of economic
uncertainty, the government implements strict economic policies by cutting
government spending and reduce social protection, which causes growing social
disorder globally. The means of democracy are critical to raising these
populations' common issues. This highlights the need for labor unions to gather
the interests of the deprived and articulate their demands. This is why political leaders should promote
and point out the importance of self-organization to provide a platform for
participation and fight for social inclusion (ILO, 2011).
Unjust. Because the
policies are not fair when it comes to benefits for permanent employees and
service contractors, even if contractuals work harder than some
permanent employees, all the privileges and benefits are only for the latter. Those who work hard should also be
appropriately compensated, just like regular employees. The permanent
employees get all the bonuses and allowances while the contractuals who have
helped them attain their performance ratings get nothing.
Lower job satisfaction.
Precarious workers experience higher perceived job insecurity rates associated
with lower job satisfaction, mental health, and life fulfillment.
Temporary contracts are perceived to have job insecurity held in various
national and sectoral contexts from public sector employees in the United
Kingdom (Guest and Conway, 2000).
With
the idea of having uncertain and insecure employment, fixed-term employees are
more inclined to experience mental fatigue, physical exhaustion, stomach aches,
and increased illness (Aronsson et al., 2002). Thus, Warr (1994) included job
insecurity as the primary stressor in temporary employment arrangements in his general framework for studying work and mental health. Guest and Conway (2000)
added that temporary contracts are linked to lack of work-life balance, job
dissatisfaction and more likely not to stay long in the company. Finally, Quinlan et al.
(2000) argued that job dissatisfaction results from lack of training,
supervision, and limited access to information associated with temporary
contracts instead of solely to the work relationship's limited duration.
Why is it happening?
According
to Arthurs (2006), most countries have distributed the responsibility of
enforcement and regulation of labor law among the various departments, which
caused an unclear and vague platform to air concerns and influence policy. Weak
implementation of labor law left those protected workers still feel unsecured.
Moreover, ILO (2011) added that labor law enforcement deteriorated because of austerity
measures made by the government. This is commonly experienced in the
under-funded labor departments.
As
per Civil Service Rule, government agencies are allowed to hire service
contractors for a short duration only not exceeding six months for "piece
work" or intermittent jobs which are peripheral tasks only. However, in
reality, they are hired to render services essential to the government agency's
functions or similar to those performed by regular employees. This causes the
renewal of their contract and extending them for years. The same goes with the private entities, they
terminate the contract before the sixth month to avoid regularization of an
employee, but in reality, the worker plays an important role and has a
significant contribution to the company. Private organizations practice contract of service
employment primarily to increase profits by hiring cheap labor, while for the
government is due to limited budget resources.
Some advantages of contractualization
Organizations
hire contractual as a transition to regular work, it has been a good path
toward the regularization of employment. This may also open an opportunity for
applicants, especially fresh graduates, to earn experience.
Contratualization creates job
opportunities for the unemployed especially for the low-skilled workers from
the deprived families who can apply to private businesses who only need a high
school graduate or college undergrad to do peripheral level tasks. Most of the time, in government agencies,
applicants should have a bachelor's degree, limiting the qualified candidates.
On
the employer's part, they hire contractual to cut and avoid spending. It is
more economical than maintaining a larger core workforce that would require
more generous compensation comprising regular employees with labor entitlements
and attaining a lean but means structure and has flexible work arrangements to
augment their remaining regular workforces.
According
to Osoro (2020), some authorities
claim that the practice has considerably helped economic growth. To them,
hiring workers on a temporary employment contract helped the jobless. In the long run, this progresses the status
of the economy. Also, contractualization promotes recruitment flexibility for
companies. Combining both regular and temporary workers stimulates an efficient
and productive environment.
Some
key elements to prevent the progression of Contractualization
Paqueo
& Orbeta (2016) mentioned that President Duterte and his economic advisors
are carefully weighing the effects of ending endo and of restraining other
forms of the contract of services. The urgency of ending the endo is an
overstatement that could significantly hinder the country's economic growth. At
present, the government may find a way and prioritize creating better job
opportunities for informal workers, ease up the use of contracts of services,
and find ways of giving better-paying jobs, stable sources of income, and
tenure security.
ILO
(2011) stressed that contractual workers in a company must be restricted only
to actual rational requirements during peak seasons for labor demand. No
company should be permitted to hire more than the rational limit, like five
percent of their human resources. Temporary contracts should be justified and
converted to a permanent contract after the probationary period if the work
required is part of the company's essential processes.
Pedersini & Coletto (2010)
highlighted that some nations implemented regulations to
avoid the abuse of contractual workers, such as:
1) According
to purposes or situations in which a company needs to hire temporary workers.
2) The employer is restricted only to a certain percentage of the total number of
workers.
3) Certain
sectors are not allowed to hire temporary workers.
4) Regulating
the length or quantity of short-term tasks for a particular worker. Some
instances are:
Belgium permits the hiring of temporary
workers only in the following conditions:
I. to
work as a substitute for a regular employee;
II. for
reinforcement during exceptional peak seasons of labor;
III. unusual
job assignment;
IV. and
for artistic presentation.
France's regulation is stricter because
temporary workers can be hired for the following conditions:
I. substitute
for absent employees;
II. accomplish
the momentary upsurge of work; and
III. do
essentially time-limited jobs.
The temporary work is also restricted to 18-24
months only, or else the contract needs to become permanent.
This is better than any other European nation
such as Poland, Romania, and Italy, where the maximum limit is between 24-36
months.
A successful business should treat and rightfully reciprocate to their employees
by giving them a just salary, conducive and safe working conditions, concern
about their health and wellbeing, and most of all, security of tenure. If a
business can provide these benefits to their employees including their
contractual, the business will thrive in the long run as it will help boost the
business output and decrease unnecessary expenses in the future; here is why.
1
talTalented
workers will be loyal to the company in the long run. When an employee stays longer in a company,
the more they appreciate and comprehend the work processes and the company's
cause. It will result in less disruption from new hires learning new duties.
The business will save resources for the new recruitment.
3. Motivated
employees produce a high output. When
they are paid more, they will work more diligently to justify their salary.
Employees can also focus on their work rather than the dwelling of their
unsatisfactory pay.
4. When
employees give valuable or excellent work, they justify compensating for it.
They should receive a reasonable portion in exchange for the value they are
giving to the company.
5. With the
best and most talented employees, the output can be significantly higher.
Subsequently, the business will need fewer employees, saving the business in
net salaries.
Possible Effects of Ending Contractualization
President Duterte believes that ending
contractualization causes an imbalance between investors and businesses and
will put the Filipino workers in a difficult situation in the long run.
However, he stressed that while he remains committed to eliminating the abuse
of contractual employment, workers' and employers' interests should healthily
co-exist. He highlighted that his goal is to end the exploitation while giving
the businesses the freedom to participate in those practices advantageous to
both management and the workforce.
The
National Economic and Development Authority Secretary Pernia added that the law
should benefit both the workers and employers as they submit to the President
their proposed adjustments and recommendations to the SOT bill
Some
business groups and organizations prompted the President if he endorses the
bill, it could lose the confidence of the foreign and local investors, which
will result in unemployment and a decline in job opportunities. The Employers
Confederation of the Philippines said that the President might have
comprehended the bill's adverse effect on the economy. The government only
needs to re-enforce the existing labor regulations to combat illegal
contractualization and not a new law. (Santos, 2019).
Conclusion
When
a business becomes successful and incredibly profitable, the company should
ethically and morally also give back to the employees by giving them the
security of tenure and increasing their compensation and benefits because they
are the ones who accelerate the business. If their pay affects their
dependability, somehow, it will also impact their efficiency. This translates
that their security and compensation are directly related to the company's
success. Their satisfactory compensation supports their own life and influences
their decisions. This is also what Stakeholder theory assumes that the success
of a business can be measured in the value they give to the majority of their
stakeholders, where employees are considered the most significant
non-shareholding corporate stakeholding group. (Lynch-Fannon, 2004)
Contractual
workers are usually exempted from most labor protections and risky tasks.
Agency employment relationships allow employers to avoid providing benefits as
the permanent employers are enjoying. Moreover, the use of temporary and
subcontracted labor commonly leads to the abusive use of such contracts that
leave workers defenseless to unjustified employment termination, low job
security, low wages, and little to no access to social security benefits.
Workers' access to trade union rights is limited because they are hired
temporarily or subcontracted. They have
legal restrictions to join the trade union and to be a part of a bargaining
agreement.
Contractual
workers should be treated equally with respect, the use of temporary contracts
should not compromise their wages, working conditions, social and labor
protection, and rights in joining the collective agreement same as other
organization workers. Ethically, this is why permanent employment and direct
hiring are much preferred and advantageous to contractual workers.
The
author was once a contractual employee and knew the feeling of being
there. He experienced working until 4 am
for a week to finish a report. He experienced working beyond office hours and
spending the weekend for his supervisor's interest. He experienced rendering
overtime even without pay. He also experienced working a month without salary
or allowance because the budget and contract are waiting to be approved. All of these, he could not complain due to
the fear of not getting his contract renewed, he had no voice, he felt so
powerless and so abused.
The author hopes that whoever works hard should also be
appropriately compensated regardless of employment status and that is
using the relationship as an ethical base. This is the give-and-take
(vice-versa) relationship between
the employer and the employee.
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