Would ending Endo contribute to inclusive economic growth? Part (2)

 
 
In my post last Oct. 20, 2016, we discussed about the paper written by Dr. Vicente Paqueo and Dr. Aniceto Orbeta on the impact of “ending endo” to inclusive growth.

Endo is the term used by progressive groups to describe the abusive practice of 555 by employers to circumvent the constitutional guarantee of security of tenure. 555 is the 5 month maximum contract given to temporary employees. Shortly after expiration, the contract will be renewed for another 5 months. And the cycle is repeated until the employee is dropped for good.

ending endo“, is a populist policy being pushed by progressive groups to put to stop what they believed as social injustice. Denying the right of employees to job security. This is one of the  issues raised to candidates last presidential elections, where the winning candidate, Rodrigo Duterte, promised to support.

DOLE has since released it’s action plan on how to fulfill the President Duterte’s (PDU30’s) promise:

  1. Limit the scope to the practice of 555
  2. 50% reduction for 2016
  3. 100% by 2017
  4. No plans for new legislation, but will influence all employers to comply with the present regulations.
  5. The labor code will be reviewed

 

In a nutshell, the study by Dr. Vicente Paqueo and Dr. Aniceto Orbeta believed that classifying all temporary employment contracts (TECs) as 555 will be counter productive because some TECs are value  adding to employment generation and the economy.

Citing the experience of Europe, the study revealed that Europe once embraced a strict policy against TECs, similar  to the Philippines (PH), and this led to jobless economic growth. Only after reforms were initiated that employment rate increased, and inclusive economic growth were felt.

The study also suggested that based on the survey they conducted,  temporary employees interviewed in some parts of PH, were satisfied since most economic benefits were given, sans the security of tenure.

Furthermore, the practice of TECs actually helped temporary employees gain permanent employment as a result of longer assimilation to the job.

On the employer side, the study revealed that they opted to practice TEC and 555 to (1) cope to the changing business landscape (2) avoid the cost of maintaining regular employees and (3) avoid litigation cost associated to removing regular employees.

READ: Would Ending Endo Contribute To Inclusive Economic Growth? Part (1)

Reactions from the experts

 

Emmanuel F. Esguerra, Ph.D
Professor of Economics at UPSE, and acting Socia-Economic Planning Secretary General of NEDA from Feb. 1 – June 30, 2016.

Dr. Esguerra agreed with the economic reasons pointed out by the study since the business landscape has evolved. The present non flexible probationary period affects the viability of some companies, thus,  they resort to TEC or ending the employment contract before regularization.

Since flexibility in the labor market will stay, Dr. Esguerra believed that the energy of stakeholders is best spent in developing a “risk sharing” mechanism. The concept should be able to protect the needs of the labor in a volatile business environment.

 

Ma. Nieves R. Confessor
Core faculty member of the Asian Institute of Management (AIM) and former Secretary of DOLE.

Prof. Confessor believed that the present form of the labor code is anchored on the import substitution policy, passed to address the concerns of PH labor landscape during the 70s. Since then, much has changed.

She also believed that focus should move from job security to income security. Since the notion of contractualization is part of the changing landscape of the global economy, the revenue of local businesses is dependent on cyclical demands, financial volatility and global risks. By flagging all forms of TEC as endo, the country will fail to appreciate and accept the new normal.

Prof. Confessor further believed that the concern about contractualization should not be focused not on permanent employment, but on risk sharing. The government, therefore, should take the lead in looking at the best practices of the world in protecting both employees and employers in facing an uncertain world.

 

Atty. Raul Angeles
Executive Director of the Board of Investments (BOI) of the Dept. of Trade and Industry (DTI).

DTI believed that the issue on contractualization can be better addressed through series of consultations with various stakeholders, thus, DTI and DOLE initiated such meetings with the end goal of enforcing employees rights and benefits which are provided in the Labor Code and DO No. 18-A.

Though DTI took note the study, the government will not condone the  “endo practice” as a coping mechanism of employers to avoid costly mandates and labor market inflexibilities. Endo practice remains prohibited under DO No. 18-A, Series of 2011.  although we support legitimate labor outsourcing of independent service contract as provided for under the same DO.

To balance business interest and employee rights, DTI came-up with this WIN-WIN proposal.

  • Workers are hired by legitimate labor outsourcing Service Providers (SP) as approved by DO 18-A
  • Workers are hired as regulars, with full benefits such as leave credits, 13th month, retirement, SSS, Philhealth, etc.
  • Workers get deployed or re-deployed when needed, stays as regular status with SP. If no other client, workers enjoy retirement or separation pay, like a usual regular worker.
  • Companies have flexibility to hire workers as regular or outsource due to seasonality or specific functions, so companies can focus on building the business.
  • What is crucial is the compliance of service providers in giving full benefits to the workers. Due diligence needed if SP pays its workers full benefits. Principal companies should black list erring SPs because they can also be impleaded. SP associations should also police their ranks.

DTI claims that the proposal is different with the current practice because:

  • The regular worker with full benefits has permanent status (vs current, co-terminus with project). Thus the worker must be redeployed to another principal company if the former principal company cuts the contract. If the worker cannot be redeployed, he/she can enjoy a retirement or separation pay like a regular worker in a company whichever is applicable.
  • Retirement benefits or separation will be mandatory (vs current where only some do this depending on the principals. Normally, big companies would do this and pay little more for their retirement fund).
  • Workers tenure is secured by the SP.

Alex V. Avila
Assistant Secretary, Department of Labor and Employment (DOLE)

ASec. Avila, welcomed the result of the study, and shared how the present administration will end endo. While they’re presently engaging all stakeholders to review relevant department orders and the labor code itself, enforcement of existing laws will continue.

 

Given the suggestion of DTI, do you think this will be palatable to both employer and labor groups?

 

This post is supported by a writing grant from the Philippine Center for Investigative Journalism (PCIJ) .

 

 

Sonnie is a Talent and Organization Development and Brand Communications Strategist who won the best advocacy blogger in 2010 and best corporate and brand blogger in 2015.

He is a Senior Consultant for Presidential Communications and Operations Office working with the Committee on Media Affairs and Strategic Communications for ASEAN 2017. He also serves in similar capacity with other corporate clients.

His views remain his, and do not represent his clients, associates and family

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  • Ang hirap sa usapin ng ENDO is this. The government do not possess the right data to work with. Meron pero puro estimates. Pero national policies are formed on estimates, so sige. What does ENDO mean for companies? Its purpose if iyon ang masusunod is to give employers a chance para salain ang employee. Pero dahil ito ay inaabuso, syempre gusto ng labor force alisin. For me, ito lang naman. Give the employers a way to FIRE erring employees and alisin ang ENDO. Proven na iyan, ang labor force, anuman ang meron will always ask for more while doing less kasi regular na.

    • meron naman paraan to remove regular employees, basta just and authorized causes; and due process will be observed.

      this proposal from experts should be pursued: “risk sharing scheme”

  • Jenny

    Interesting article. I like that you brought in reaction from experts. Though this is not a problem to where I live, I find it interesting to read current events in other countries. Your post here is very informative, thanks for keeping us informed..

    Have a great day,
    Jenny Holmquist
    http://www.freedombasedbusinesses.com/

  • verushka ramasami

    Interesting read into another counteries Labour Laws. In South Africa labour law is there to protect and support the worker. We have several workers unions within in each sector who deal with the work related problems of the members. Unions are very active role players in South Africa and will strike it matters are not sorted.My current job sector is going through some crazy ways of restructuring but the workers are not letting it happen.

    • yours and ours seems to have a similar framework

  • daawnflores

    This is a really controvertial topic. I have relatives who’ve experienced ENDO. Mahirap kasi from the empoyee’s part yung palipat lipat ng trabaho, hanap nanaman after ma ENDO kaya talagang pinupush nila na ma end na to. I hope the government could give a win win solution for the employees and employers.

    • the DTI proposal seems to be a win-win approach

  • Ana S

    Not familiar with the topic and it’s a bit complicated. But repeating 5 months contract infinitely is terrible and even sounds crazy to be true. In my country for example you can’t have more than 3 temporary contracts and they need to be the same length. If they don’t keep you after, they need a reason for that. In the public service, they can renew your temporary contracts as long as they want as long as it’s not more than 3 years the total or something like that. Unfortunately, there’s a lot of systems using unfair ways on employees (and citizens in general) and it’s always hard to get our voice heard and accepted.

    • probably our government can learn from yours, on how to deal with contractual employees

  • Marissa Abao

    When I was a contractual employee, I worried about getting leaves. Employers do not care that much when you are a contractual employee. You have to prove your worth by doing more work and thus, lots of overtime work. I tried my best not to be absent when I got sick because I cannot get a leave. I hope that DTI would implement a better policy in taking care of contractual employees too.

    • The present government is doing something to correct the abuses associated w/ contractual employment. By the way, what was your job then?

  • Chessica ?irasol

    I am pro-ending ENDO. I think this country has served private businesses way far too much for so long now. I think it is time the government give what employees (small or big) really deserve. Companies and business are there because they profit enough to keep the whole company running, employees tied up in an ENDO won’t be able to profit after 5 months once the contract is finished. ENDO is an unfair agreement.

    • if you’re referring to the 555 practice, it has to stop. But there are temporary employment contracts that are beneficial to the company

  • Michael Rey

    I’m not really updated about with this kind of topic. I have friends who are employed under an agency and their risk of losing their jobs is really high. I hate the idea that they are not assured that they will be regularized as well. I’m not into current events but I still hope for the best!

    • what kind of job do your friends have?

      • Michael Rey

        Hotel jobs, sir Sonnie.

        • if their contract is often renewed, they should be a regular employee of the agency

  • AngeliePangilinan

    I am a freelancer so I am not really in tune much with this current issue. My boyfriend used to work under an agency and even though they didn’t terminate them after the contract, they don’t get benefits and they never get salary increase.

    • Is he a regular employee under the agency?

  • I’m still a college student and I’ve heard of this issue far too many times before. My take on ENDO agreement is that it’s unfair for employees. To think that these people actually contribute to the profit growth of a company. It doesn’t serve them well that they lose their jobs after 5 months, and then they look again for another. It’s an endless cycle for some.

    • If it’s the 555, it’s illegal

  • Ferna

    I experienced this more than 15 years ago until I came to realize that it’s not taking me to the level where I want to. It took me quite long to make a decision to stay away from the “endo” kind of life, it’s a trap for me.

    • 15 years, wow, that’s a long time ago. What’s your job then? If you would not mind..