Government Contractualization: Employment Opportunity or Exploitation?

 Jovelyn O. Guillermo

Divine Word College of Laoag

Abstract

Workers engaged under contractual, temporary, and other non-standard employment arrangements play a critical role in the operations of Philippine government agencies. Among these, Contract of Service (COS) and Job Order (JO) workers perform essential functions similar to those of regular employees, yet their employment status and benefits remain legally and practically distinct. Despite their contributions, these workers often lack job security, social protection, and access to the benefits enjoyed by regular government employees, leaving them vulnerable to exploitation.

The legal and policy framework governing COS and JO workers clarifies their status and limitations. Under CSC Memorandum Circular No. 40-98, workers under contracts of service and job orders are employed for short durations not exceeding six months on a daily or project basis. These arrangements cover lump-sum work or specific services where no formal employer–employee relationship exists. Although these workers are subject to oversight by the Commission on Audit (COA), they are not entitled to the same benefits and protections as regular government employees. Jurisprudence, including CSC Resolution No. 020790, confirms that job order workers are not considered government employees, and the services they render are not regarded as government service.

In response to the growing number of COS and JO workers and the associated issues of unequal benefits, lack of social protection, and unclear accountability, the Civil Service Commission (CSC), Commission on Audit (COA), and Department of Budget and Management (DBM) issued a joint circular in 2017. More recently, Joint Circular No. 1, series of 2025, provided clearer guidelines on the rights, benefits, and responsibilities of COS and JO workers, aiming to enhance transparency, accountability, and worker protection.

This article examines the working conditions of COS and JO workers in comparison with private sector employees, highlighting systemic challenges and recent policy reforms. By analyzing these issues, the study underscores the urgent need for reforms to ensure dignity, fairness, and security for non-standard government workers.

Keywords

Contractualization, Contract of Service, Job Order, Government Workers, Exploitation, Employment Benefits, Public Service

Introduction

Contract of Service (COS) and Job Order (JO) workers are the backbone of government operations, yet they remain among the most overlooked employees in the public sector. These workers perform essential tasks, observe office hours, report to supervisors, and deliver outputs critical to public service. Despite their indispensable contributions, they are routinely denied job security, benefits, and basic labor protections.

Originally intended as temporary arrangements, COS and JO positions have, in practice, become permanent roles. Policies of the Civil Service Commission (CSC), together with budgetary practices under the Department of Budget and Management, allow agencies to maintain a flexible workforce while avoiding obligations to these workers. This unequal treatment constitutes a systemic form of discrimination within government employment.

The scope of the issue was highlighted during the CSC’s 2026 budget briefing before the Senate Finance Committee. Senate Committee chair Sherwin Gatchalian revealed that over 900,000 government workers—nearly one in every ten employees—are either Job Order or Contract of Service personnel. To date, the Philippine civil service workforce exceeds 2 million, comprising 1,873,504 career professionals and 225,439 non-career professionals, including elected officials. Among them, 70% of career professionals work in national government agencies, while 20% serve in local government units (LGUs). Conversely, 63% of non-career professionals are employed in LGUs, and 25% in non-government agencies. (RG Cruz, 2025)

Gatchalian further noted that, while many permanent positions remain unfilled, professional services expenses have risen sharply, suggesting that agencies increasingly rely on Job Orders or Contracts of Service instead of filling permanent posts. This situation underscores the urgent need for labor reforms and stronger protections for this largely invisible workforce. (RG Cruz, 2025)

The Nature of Exploitation

COS and JO workers perform the same duties as regular government employees—they report daily, follow office rules, meet deadlines, and answer to supervisors—yet they are denied formal recognition and security. They can be terminated at any time without due process and are deprived of essential benefits such as leave credits, retirement plans, and protection during illness. This arrangement allows the government to reap the productivity and commitment of a permanent workforce while avoiding its obligations as an employer. Such systemic control without protection is not merely unfair—it is exploitation, turning dedicated public servants into a disposable workforce. The scale and persistence of this practice underscore the urgent need for policy reforms that ensure fair treatment, social protections, and recognition for those who sustain government operations.

Why the System Persists

The continuation of COS and JO arrangements is largely driven by convenience for government agencies. These arrangements allow agencies to bypass hiring restrictions and budget ceilings, a practice legitimized by regulatory definitions and gaps within Civil Service Commission policies. Critically, there are virtually no plantilla positions available for rank-and-file workers—most regular positions exist only at the managerial or head level. This leaves essential operational roles filled by temporary workers on short-term contracts. Coupled with limited budgets, agencies often prioritize short-term professional services contracts over investing in human capital, sometimes allocating funds to questionable projects rather than addressing workforce needs. Consequently, COS and JO workers often remain on short-term contracts for five to fifteen years, repeatedly renewed without regularization or access to benefits and protections afforded to permanent employees. This perpetuates a cycle of instability and exploitation, allowing the government to maintain a flexible workforce at minimal cost while shifting the burden of job insecurity entirely onto the workers themselves.

Impact on Workers and Public Service

COS and JO workers face constant uncertainty, as they have no security of tenure and can be terminated at any time without due process, often under “endo” or coterminous arrangements tied to projects or funding cycles. This precarious situation prevents them from planning for the future or accessing social protection programs such as health benefits, retirement plans, and leave entitlements. The resulting stress, reduced productivity, and lower morale directly affect the quality and efficiency of public service. Moreover, the divide between permanent staff and contractual workers undermines teamwork, collaboration, and a sense of fairness within government offices. The reliance on temporary labor not only exploits workers but also weakens the institutional capacity of public agencies, exposing the systemic inequities and vulnerabilities embedded in the current employment framework.

The table below shows the updated benefits comparison of COS/JO based on Joint Circular No. 1, series of 2025 vs. Private Sector employees:

Benefit / Protection	Government COS/JO Workers (Under JC No. 1, 2025)	Private Sector Employees
Security of Tenure	Temporary contracts; not covered by Civil Service laws; no security of tenure	Regular employees have security of tenure; termination requires cause and due process
Leave Benefits	Not provided (no sick, vacation, maternity/paternity leave) as not covered by Civil Service law	Entitled to statutory leave benefits under the Labor Code
Retirement / Social Security	Contributions to social security programs (SSS, PhilHealth, Pag‑IBIG) may be provided through a premium up to 20% of wage/salary, where funded; still not credited as government service under Civil Service laws	Mandatory SSS, PhilHealth, and Pag‑IBIG contributions with full access to benefits,   including retirement, sickness, and death benefits
Health Insurance / PhilHealth	Agencies must ensure access to social security and healthcare, often via funded premiums up to 20% of pay	Employer‑paid PhilHealth contributions with full benefit access
Hazard Pay / Allowances	Not specifically mandated for COS/JO; overtime pay may be given, subject to availability of funds; outside typical allowances given to regular government employees	Entitled to hazard pay, night differential, overtime pay, and other allowances
Bonuses / Incentives	Generally not entitled to 13th-month pay, representation and transportation allowances, PERA, and other bonuses under JC No. 1	13th-month pay is mandatory; performance and productivity incentives may also apply
Pay Level	COS may be paid the prevailing market rate or equivalent government salary; JO workers receive a daily wage of comparable government positions, plus an optional premium of up to 20% depending on funds	Wages and salaries are determined by the employer with statutory minimums; a regular payroll structure
Job Security and Career Progression	No promotion/pension credit as government service; CCS, COA, DBM encourage agencies to consider absorption into plantilla positions where qualified	Opportunities for promotions, salary increments, training, and career advancement
Coverage under Civil Service Law	Not covered; services not creditable as government service (no Civil Service benefits)	Covered under Civil Service Law (public) or Labor Code (private)

This comparison highlights the inequality in benefits and protections between COS/JO workers and private sector employees, emphasizing the urgent need for reforms. While the government mandates that private sector employers provide these required benefits as per DOLE regulations, it paradoxically fails to ensure the same protections for its own workers. COS/JO employees, despite having rendered satisfactory service beyond the standard probationary period, are often denied these benefits on the grounds of not holding a regular position—effectively institutionalizing exploitation within the public sector.

Recent Policy Reforms

In Joint Circular No. 1, series of 2025, the Civil Service Commission (CSC), Commission on Audit (COA), and Department of Budget and Management (DBM) issued revised guidelines on the engagement of COS and JO workers. The reforms aim to regulate contractual employment, establish clearer standards, and limit the overreliance on short-term arrangements. Notably, the circular introduces a strict cap on the number of COS and JO hires, with no increases allowed in subsequent years, preventing agencies from using temporary contracts to indefinitely replace regular positions. It also mandates additional benefits for contractual workers, including a 20% premium to cover employer and employee contributions to SSS, PhilHealth, and Pag-IBIG, proper compensation for overtime work, reimbursement for travel expenses incurred in the performance of official duties, flexible work arrangements to support work-life balance, and opportunities for regular positions where applicable. Agencies are also directed to review staffing and consider qualified COS/JO workers for appointment to vacant permanent (plantilla) positions, subject to merit selection plans. Another possible approach to mitigate reliance on individual contracts is the adoption of institutional COS arrangements, where projects or offices hire contractual workers collectively, which can streamline hiring, ensure standardized benefits, and reduce administrative inefficiencies compared to multiple individual contracts. Furthermore, under the Government Optimization Act, agencies are required to factor their existing COS/JO workforce into long-term organizational restructuring to reduce "contractualization."

Conclusion

While the reforms introduce caps, additional benefits, opportunities for regularization, and planning measures, they cannot fully address the structural gaps that perpetuate insecurity, exploitation, and instability among contractual personnel. Until permanent positions are created and funded for rank-and-file roles, the reliance on COS and JO workers—and the inequities they face—will continue. At the core, COS and JO workers are human beings whose dignity must be respected. This article underscores that while government agencies may contract services under civil service rules, such authority must not be used to mistreat or mismanage these workers. Upholding their rights is essential—not only for justice—but for building a competent, fair, and effective public service.

References

CSC Memorandum Circular No. 17, series of 2002. CSC Resolution No. 020790. https://www.csguide.org/items/show/1125

CSC Memorandum Circular No. 40, series of 1998. Revised Omnibus Rules on Appointments and Other Personnel Actions. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://csc.gov.ph/phocadownload/userupload/irmo/mc/1998/mc40s1998.pdf

CSC-COA-DBM Joint Circular (JC) No. 1, s. 2017. Rules and Regulations Governing Contract of Service and Job Order Workers in the Government. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.dbm.gov.ph/wp-content/uploads/Issuances/2017/Joint%20Circular/CSC-COA-DBM%20JOINT%20CIRCULAR%20NO.%201%20(1).pdf

RA 12231 (2025) An Act Optimizing the National Government for Efficient Public Service Delivery. https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/2/99481

RG Cruz (2025). ABS-CBN News. 1/3 of government workers have no security of tenure, CSC data shows. https://www.abs-cbn.com/news/nation/2025/10/13/1-3-of-government-workers-have-no-security-of-tenure-csc-data-shows-1953

CSC-COA-DBM Joint Circular No. 1, s. 2025. Revised Rules and Regulations on the Engagement of the Contract of Service (COS) and Job Order (JO) Workers in the Government. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.dbm.gov.ph/wp-content/uploads/Issuances/2025/Joint-Circular/CSC-COA-DBM-JOINT-CIRCULAR-NO.-1,-s.-2025.pdf

 

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Factors affecting the profitability of commercial banks in Ilocos Norte

 Rojelyn Marie Sotelo Bagain

Divine Word College of Laoag – Graduate School

Abstract

Commercial banks play a critical role in economic development by mobilizing savings, facilitating payments, extending credit to businesses and households, and contributing to financial stability. The profitability of commercial banks is a critical indicator of their financial health and sustainability, which in turn impacts the overall stability and growth of the regional economy as well as the national economy. Thus, this article discusses the key internal and external factors affecting the profitability of commercial banks and is anchored with different economic theories, which include Agency Theory, Risk Management Theory, Structure–Conduct–Performance (SCP) Theory, Trade-off Theory, and Macroeconomic Theory.

Keywords:

Commercial Banks; Profitability; Internal Factor; External Factors; Agency Theory; Risk Management Theory; Structure–Conduct–Performance (SCP) Theory; Trade-off Theory; Macroeconomic Theory.

Introduction

A commercial bank is a financial institution that accepts deposits, provides loans for individuals and businesses, and offers other services like checking accounts, certificates of deposit, and foreign exchange services. In the Philippines, banking continues to be fundamental for growth, especially in provinces where financial inclusion, investment, and local business development hinge on access to banking services. Ilocos Norte, as a growing province in Region I, has seen increasing economic activity and investment, contributing significantly to the Gross Regional Domestic Product.

However, profitability remains a continuing concern in the banking sector, influenced by both internal (bank‐specific) and external (macroeconomic, regulatory, market) factors. Most importantly that there are several changes occurring in the Philippine banking sector, because of its adaptation to new conditions such as the deregulation of the national markets and the level of competitiveness internationally. At the national level, the Bangko Sentral ng Pilipinas is actively pushing for reforms to accelerate the development of the domestic capital market as an alternative funding source for the economy. Since it is reported that about 98% of the local companies in the Philippines are supplied by the banks, while 2% comes from the capital market. This reform may have capital implications on banking profitability due to increasing market competition. Understanding the factors that affect the profitability of these banks is essential not only for bank management but also for policymakers, investors, and stakeholders who seek to enhance the banking sector’s performance and contribution to economic development (Hinlo, 2025).

Profitability of Commercial Banks

This article focuses on analysing key internal and external factors affecting the profitability of commercial banks. Internal factors typically include bank-specific determinants such as bank size, capital adequacy, asset quality, operational efficiency, loan portfolio composition, and liquidity management. External or macroeconomic factors encompass economic growth, inflation rate, money supply, government regulations, and competitive pressures within the banking industry.

Prior studies in the Philippine banking context have shown that bank efficiency, money supply growth, bank size, and liquidity significantly affect banking profitability, while other studies in similar developing regions highlight the importance of capital adequacy and asset quality as primary profitability drivers. And these are being anchored with different theories.

Agency Theory explores the relationship between principals (e.g., shareholders or owners) and agents (e.g., managers or bank officers), where the agents are supposed to act in the best interest of the principals leading to information asymmetry and potential inefficiencies, impacting profitability through increased monitoring costs, risk-taking (moral hazard), and suboptimal decisions, mitigated by strong governance, incentives, and regulation to align actions with shareholder wealth. (Sukendri et al., 2024)

Meanwhile, risk management theory in banking posits that effectively identifying, assessing, and mitigating risks (credit, liquidity, market, operational) is crucial for sustainable profitability, as these risks directly impact performance, while also influencing risk-taking behavior, creating a complex interplay where good management can boost returns but excessive profitability might paradoxfully encourage riskier ventures, aiming to balance growth with stability. (Babulo & Viswanadham, 2021)

On the other hand, the Structure–Conduct–Performance (SCP) framework is used to examine how the market structure of commercial banks and their operational conduct affect financial performance. Through this model, the study identifies both structural (e.g., competition, market size) and conduct-related (e.g., pricing, credit policy) determinants of profitability.

Moreover, Trade-Off Theory serves as a theoretical foundation for examining how capital structure decisions affect bank profitability. According to the theory, banks must balance the benefits of leverage (e.g., tax shields, increased lending capacity) against the potential costs of financial distress and regulatory non-compliance. In the context of commercial banks in Ilocos Norte, understanding this balance can help explain variations in profitability across institutions with different capital adequacy levels.

This study is also grounded in macroeconomic theories, which explain how large-scale economic factors affect firm-level performance. According to Keynesian and monetarist perspectives, variables such as GDP growth, inflation, interest rates, and unemployment significantly influence the behaviour of borrowers and the operational environment of banks. In the context of Ilocos Norte, where local economic conditions are closely tied to agricultural production, tourism, and remittances, these macroeconomic forces are expected to have a direct impact on bank profitability.

Factors affecting profitability

The profitability of commercial banks is shaped by a complex interaction of internal (bank-specific) and external (environmental) factors, and these relationships can be clearly explained through established financial and economic theories.

From an internal perspective, factors such as management efficiency, asset quality, capital adequacy, liquidity management, cost control, and risk-taking behaviour play a decisive role in determining bank profitability. Agency Theory highlights how conflicts between shareholders, managers, and depositors can reduce profitability when managerial decisions prioritize personal interests over value maximization. Strong corporate governance, performance-based incentives, and effective monitoring mechanisms help mitigate agency costs and improve profitability. In line with Risk Management Theory, prudent credit risk, market risk, and operational risk management enhance profitability by reducing non-performing loans, stabilizing earnings, and preserving capital. Banks that balance risk and return effectively tend to achieve more sustainable profits.

Capital structure decisions are also critical. Trade-off Theory explains that banks aim to optimize their capital mix by balancing the tax benefits of debt against the costs of financial distress. Adequate capitalization strengthens confidence, reduces funding costs, and enhances resilience, thereby positively influencing profitability, although excessive capital may dilute returns.

From an external perspective, market structure, competition, and macroeconomic conditions significantly influence bank performance. The Structure–Conduct–Performance (SCP) Theory suggests that banks operating in more concentrated markets can exercise market power, set favourable pricing for loans and deposits, and earn higher profits. However, excessive concentration may reduce efficiency and innovation over time. Meanwhile, Macroeconomic Theory emphasizes that economic growth, inflation, interest rates, and monetary policy directly affect banks’ profitability by influencing credit demand, loan quality, and net interest margins. Favourable macroeconomic conditions generally support higher profitability, while economic downturns increase credit risk and compress margins.

Conclusion

Overall, commercial bank profitability is not determined by a single factor or theory but by the dynamic interaction between internal managerial decisions and external economic and market forces. Banks that align effective governance (Agency Theory), sound risk practices (Risk Management Theory), optimal capital structures (Trade-off Theory), competitive strategies (SCP Theory), and adaptability to macroeconomic conditions (Macroeconomic Theory) are better positioned to achieve sustainable and resilient profitability.

References

Babulo, A. A., & Viswanadham, P. (2021). The effect of risk management practice on the financial performance of Ethiopian commercial banks. INNOVATIONS, 530003. https://journal-innovations.com/assets/uploads/doc/4600c-1294-1311.23640.pdf

 

Hinlo, J. E.  (2025). Determinants of banking profitability in the Philippines. Usep. https://www.academia.edu/65281585/Determinants_of_Banking_Profitability_in_the_Philippines

Sukendri, N., Muktiyanto, A., Geraldina, I., & Safitri, J. (2024). Agency Theory in Banking: Balancing incentives and mitigating moral hazard in the Principal-Agent dilemma.

 

R, M. R. &. R. J. P. (2017). The Impact of Credit Risk and Capital Adequacy on the Profitability of Rural Banks in the Philippines.  Pakistan Journal of Life and Social Sciences, 22–22, 22877–22887. https://www.pjlss.edu.pk/pdf_files/2024_2/22877-22887.pdf

PAMATMAT, R. J. (2021). Determinants of bank group profitability in the Philippines from 2008 to 2019: A panel data regression approach. Philippine Management Review 2021, 28, 81–110. https://pmr.upd.edu.ph/index.php/pmr/article/download/357/356/

 

Mahmud, K., Mallik, A., Imtiaz, M. F., & Tabassum, N. (2016b). The Bank-Specific Factors Affecting the Profitability of Commercial Banks in Bangladesh: A Panel Data Analysis. International Journal of Managerial Studies and Research, 4(7). https://doi.org/10.20431/2349-0349.0407008

 

 

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Honoring Seniority, Valuing Competency: A Human Perspective on Advancement Practices

 Joseph Darren P. Lacanlale

Investor-Servicing Division
Ilocos Norte Trade, Investment and Promotions Office (INvest Office)

Abstract

In the context of the Public Sector in the Province of Ilocos Norte, this article explored the Pandora’s box between seniority and competency as a basis for advancement. Coming from firsthand experience as an Investment Officer under the Investor-Servicing Division of the Provincial Government of Ilocos Norte (PGIN), the study offers a narrative and personal proof confined to the reality of work involving investor facilitation, business permitting, and international trade missions. The article highlights how investor servicing work requires not only know-how, but high levels of technical skill and adaptability. Finding the harmony between seniority and competency tends to be the most effective means of improving advancements and investor servicing, based on recent practices of both the public sector and private sector in HR management. The study comes to the conclusion that developing professionalism, building investor confidence, and increasing provincial economic development all depend on a harmony of seniority-competency advancement practice.

Keywords: seniority, competency, advancement, public administration, local government, investment promotion, Ilocos Norte, trade missions, ease of doing business, Provincial Government, Local Government UnitHonoring Seniority, Valuing Competency: A Human Perspective on Advancement Practices

Introduction

Advancement Practices in the public sector have relied on seniority as an indicator of loyalty, experience, and the office’s ability to continue functioning even with changes in staff or leadership (Kim, 2010). In the Philippines, this culture remains deeply rooted in the public sector culture. However, with the evolving governance and dynamic changes in administrations, there is a need for adapting to the technological advancements, and difficult economic situations require greater emphasis on on-the-ground decision-making, individual competency than only seniority (Brillantes & Fernandez, 2011).

Working in the INVEST Office of the Provincial Government of Ilocos Norte, particularly under the Investor-Servicing Division, has offered a window into this issue. Our division facilitates investor entry and plenipotentiaries into the province, assisting companies with business-to-business (B2B) events, data gathering, site validation, regulatory requirements, and ease-of-doing-business coordination between Local Government Units (LGUs). This role places us at the middle-man of bureaucratic procedures and private sector expectations, making the question of seniority versus competency highly relevant and necessary to delve into. Specifically, this article aims to:

(1) analyze the role of seniority in ensuring stability, continuity, and institutional knowledge in public-sector operations;

(2) examine how competency influences effectiveness in investor-servicing and investment promotion work; and

(3) argue for a structured advancement framework that integrates both seniority and competency to improve professionalism, investor confidence, and local/provincial level economic development outcomes.

 

By drawing on public sector articles and my own experiences in the investor-servicing division, this study offers a glimpse at advancement practices from a staff-centered perspective. The article shows that finding the harmony between seniority and competency is not only just but also helps the office meet the real demands of running a modern local government, addressing the dynamic and complex world of investor-servicing situations we face.

The Role of Seniority in the Public Sector

Seniority plays an important role in the workplace, especially in the public sector, where political administration cycles, administrative turnover, and unexpected challenges can disrupt work. Studies show that in the public sector, the long-serving employees often hold crucial know-how that enables consistent work delivery and decision-making (Rainey, 2014).

In the Provincial Government of Ilocos Norte, senior staff often recall historical challenges, previous investor engagements, and/or long-standing regulatory requirements. These experiences help newer employees like me, especially when each investor has their own tailored requirement; identifying suitable sites for investors requiring minimum lot sizes, access to water bodies, or proximity to NGCP substations, depending on the investor’s requirement. This knowledge and experience are not easily replaced, and they anchor the stability of the office’s operations in investor servicing.

However, the question emerges: is seniority alone enough for advancement in roles that require technical precision, economic understanding, and field adaptivity?

Competency as a Significant Factor Influencing Advancement in Investor Servicing Effectiveness

While seniority ensures operations in the office run smoothly, competency drives performance, initiative, and adaptability, especially in technical positions. Studies show that merit-driven approaches to advancement improve efficiency, accountability, and motivation in the public sector (de Guzman & Reforma, 1993; OECD, 2017).

Ilocos Norte Trade and Investment Promotions Office requires a high level of competency, including:

●     Technical skills, such as producing executive briefers, preparing industry profiles, and decoding the investors' expressed statements and their underlying intentions;

●     Regulatory knowledge, especially for permits, zoning classifications (such as those under the Philippine Economic Zone Authority [PEZA]), land conversion to agricultural, tourism or renewable energy, and DENR compliance;

●     Communication and diplomacy, essential during the facilitation of investor roadshows, investor-servicing, and trade missions;

●     Field adaptability, especially during site tours where investors inquire about land elevation, logistics access, considerations, and specific industry-related.

For example, during one investor visit, the team was asked to confirm whether an identified site in Paoay was within the seismic risk zone and whether it was near tourism-protected areas. The ability to respond quickly, coordinate with local government units, and communicate effectively influences the investor’s confidence.

Competency, therefore, becomes a tangible and measurable instrument for the advancement of investment officers, especially those under the Investor-Servicing Division.

Narrative Account: Work in the Investor Servicing Division

Investor Tours and Identified Sites Assessments

Most locators provide specific requirements, including minimum hectare size, environmental conditions, exposure to seismic hazards, and proximity to substations or coastal areas. As investment officers, we accompany them throughout Ilocos Norte to validate identified sites. These site tours require not only familiarity with the province but also the ability to provide immediate and accurate information.

Business Permitting and Ease of Doing Business

Our division assists investors through the complex permitting system of the Local Government Units (LGUs), Sangguniang Panlalawigan, and Barangays/Host Communities. Coordination with the LGUs, the relevant Provincial Offices, and National Government Agencies is critical. Even minor errors or delays can negatively affect Ilocos Norte’s image as an investment-friendly province, highlighting competency as an essential trait.

Hawaii Trade Mission Experience

One of the most recent major activities was the Hawaii Trade Mission, where the Filipino Chamber of Commerce, Inc. of Hawaii visited Ilocos Norte. The Provincial Government of Ilocos Norte hosted a business symposium highlighting investment opportunities. Preparing presentations, compiling investment briefers, and responding to inquiries required a combination of technical and soft skills. Events, as mentioned, show how competency directly contributes to successful economic development.

Seniority and Competency: Toward a Balanced Advancement Practice

Empirical studies highlight that hybrid promotion systems, which integrate seniority and competency, enhance the perceptions of fairness and organizational effectiveness (Nigro & Kellough, 2014). A balanced system may include:

●        Seniority as a threshold for eligibility,

●        Competency-based performance evaluation,

●        Clear and transparent criteria,

●        Skills development programs,

●        Mentorship between senior and junior staff.

Such a practice aligns with global practices in modern public administration and supports the goals of local economic development.

Conclusion

The experience of working in the Investor-Servicing Division demonstrates that both seniority and competency play a critical role in the INvest Office. Seniority preserves know-how, insights, and standard operating procedures (SOPs). Competency, on the other hand, instills effectiveness, especially in fields like investor servicing that demand technical skills, adaptability, and initiative. Empirical evidence suggests that a balanced advancement practice offers the fairest and modern approach. Valuing competency and also honoring seniority, the Province of Ilocos Norte can strengthen its governance, improve investor servicing and confidence, and foster sustainable economic development.

References

Brillantes, A. B., Jr., & Fernandez, M. T. (2011). Good governance, reforms, and innovations in the Philippines. Public Administration and Development, 31(3), 240–251.

De Guzmán, R. P., & Reforma, M. A. (1993). Public administration in the Philippines: A reader. University of the Philippines Press.

Kim, S. (2010). Public service motivation and organizational citizenship behavior in Korea. International Journal of Manpower, 31(1), 56–78.

Nigro, L. G., & Kellough, J. E. (2014). The new public personnel administration (7th ed.). Cengage Learning.

OECD. (2017). Public sector leadership for the 21st century. OECD Publishing.

Rainey, H. G. (2014). Understanding and managing public organizations (5th ed.). Jossey-Bass.

 

 

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Pay-Quality Imbalance: Ethical Challenges in Recruitment and Compensation

 Ina Louise L. Nicolas

Divine Word College of Laoag, Graduate School

Abstract

The article discusses the pay-quality imbalance, whereby employees' compensation does not match the quality or value of work they contribute. It analyzes the impact of incongruence between pay and performance on organizational efficiency, employee motivation, and retention. Among the causes underlined in the analysis, one could name such as outdated pay structures, misalignment with market trends, and subjective techniques of performance evaluation. The article goes on to elaborate on the far-reaching implications for company culture and competitiveness while proposing ways for bringing about a balanced compensation system that would equitably reward the quality of contribution, thereby ensuring long-term business outcomes.

Keywords:

Pay-quality imbalance; Compensation; Work quality; Organizational efficiency; Employee motivation; Retention; Company culture; Equitable rewards; Long-term business outcomes

 

Introduction

In today's competitive talent environment, many companies face the challenge of pay-quality imbalance, wherein pay is not well-matched with the quality of hires. This phenomenon may be seen as an issue where pay does not reflect skills, performance, or contribution fairly, especially within high-bar recruitment strategies aimed at selecting elite talent. This disconnect may have many consequences, including morale issues and retention risks, which pose ethical dilemmas in terms of general fairness and equity. For instance, the underpayment of high performers compared to their colleagues and/or market standards might raise concerns of inequity and injustice, and the potential for these employees to leave the organization. This is in addition to the possible introduction and perpetuation of gender and/or racial imbalances in payment and their association and relationship to societal imbalances. The challenges in this area and its solutions require an understanding of the ethical frameworks, including principles of distributive justice and stakeholder theory, to guarantee that the organization attracts and retains employees as well as practices what is considered moral in the increasingly monitored business environment.

Addressing these issues delves deeply into the ethical challenges posed by pay-quality imbalances in recruitment and compensation practices, where compensation often fails to adequately reflect employee skills, performance, and contributions. By analyzing this disconnect, particularly in high-stakes, competitive talent markets, the paper aims to highlight the broader implications for organizational fairness, equity, and sustainability.

 

Pay-Quality Imbalance

Pay-quality imbalance is caused by many factors. Often, budgetary constraints restrict the degree to which organizations can compensate high performers selected through tough merit-based standards, causing raises or offers to be spread thin across employees. This dilutes incentives, perhaps not attracting or retaining the best talent. According to the Indeed Editorial Team (2025), offering merit-based pay can help a company attract confident talent, and when employees know there are financial rewards for quality work, they are more likely to self-motivate. Subjective evaluations of performance and biases further exacerbate this issue, causing variable pay practices wherein in-group favoritism or stereotypes undervalue high-quality candidates from underrepresented groups. Moreover, some schemes link remuneration packages to perceived potential, not actual achievement, leading to discord between actual quality and reward received.    

Pay-quality imbalance has extensive ethical repercussions. Being underpaid compared to high-quality hires may be seen as exploitative and will result in dissatisfaction, reduced engagement, and increased turnover. On the other hand, overpayment due to social factors or biased decisions with less-qualified employees undermines organizational fairness and creates resentment. This imbalance not only diminishes workforce morale but can also damage a company's reputation and culture. Employees who feel undervalued and unfairly compensated are more likely to experience low morale, decreased productivity, and a lack of loyalty toward the organization to Abhishek Gill (2023). It obstructs the goal of meritocratic recruitment and pay structures by fostering inequity rather than true reward for skill and contribution.

Where pay needs to be balanced against quality, transparent and objective compensation models are the requirement. Common pay scales grounded on quantifiable competencies and performance can better align pay with employee quality. Frequent pay audits and bias training support equity and minimize discriminatory gaps. Employers should utilize a clear and transparent pay system that is based on objective criteria, and compensation should be reviewed regularly to ensure that it is fair and equitable (The Team at Working IDEAL, 2024). Hybrid models linking individual merit to team or enterprise-level outcomes provide another way to achieve distributive equity while maintaining motivation. More than ever, leaders have a responsibility to set ethical frameworks that drive fairness with excellence in a manner that creates trust, engagement, and long-term success.

 

Conclusion

 

Pay-quality imbalance points to the deep-seated ethical and practical difficulties that corporations have in relating compensation to talent quality, even when their bars for recruiting are high. How to bridge this gap by embracing open, fair, and non-discriminatory compensatory policies is where meritocratic culture, inclusion, and retention or attraction of the best talents come in. By focusing on fair pay aligned with demonstrated contribution, organizations can enhance morale, performance, and their ethical standing in the workforce.

To achieve this, it is imperative for organizations to ensure a transparent compensation package, where salaries are linked to a performance index. To eliminate disparities in the compensation review process, organizations should invest in compensation audits. Organizations that lead this charge will not only attract top global talent but also build resilient, innovative teams that drive sustainable success in an increasingly competitive landscape.

References:

Abhisbek G. (2023). The Ethical Dilemma of Hiring People with Lower Salaries:

A Comparison of Company Compensation and Exploitation of Candidates. https://www.linkedin.com/pulse/ethical-dilemma-hiring-people-lower-salaries-comparison-abhishek-gill

Kulal, A. (March 2020). Ethical Issues in Recruitment, Selection, and its Impact on

Job Satisfaction Study with Reference to the Permanent Teachers of Government First Grade Colleges in Dakshina Kannada District. Deeksha-Bi-Annual Peer Reviewed Journal of Social Work, Volume-18, November-I, 12-17. ssrn_id3841503_code2740112.pdf 

Hina Chauhan et. al. (2025). Ethical Issues in HRM – Balancing Organizational

Goals with Employee Rights. Quest Journals Journal of Research in Humanities and Social Science Volume 13 ~ Issue 3 (2025) pp: 116-121. https://www.questjournals.org/jrhss/papers/vol13-issue3/1303116121.pdf

Indeed Editorial Team (2025) Merit Pay: Definition, Advantages and Disadvantages.

https://www.indeed.com/career-advice/pay-salary/merit-pay

Hi Bob, Inc. (2025). What is a merit increase and how does it work? 

https://www.hibob.com/hr-glossary/merit-increase/

Alexandra Hennessy et. al. (2024) Merit recruitment, professional advancement

opportunitie,s and prosocial rule-breaking among public servants in Greece. Socio-Economic Review, Volume 23, Issue 3, July 2025, Pages 1361–1382.  https://academic.oup.com/ser/article/23/3/1361/7769692 

Debbie Edokpolo, MSW. (2025) Rethinking Hiring: What the Return to Merit Means

for Employers (Organizations). https://www.rvphtc.org/2025/05/22/rethinking-hiring-what-the-return-to-merit-means-for-employers-organizations/

Varnit Singhal et.al. (2025) Meritocracy in Hiring: Combating Corruption and

Fostering Ethical Workforce Practices

The Team at Working IDEAL (2024) Rethinking “Merit” Increases: How Pay for

Performance Can Perpetuate Bias and Fail to Reward Merit. Pay Equity. https://www.workingideal.com/rethinking-merit-increases-how-pay-for-performance-can-perpetuate-bias-and-fail-to-reward-merit/

 

 

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