Position Paper: TOTAL BANNING OF CONTRACTUALIZATION IN THE PHILIPPINES

TOTAL BANNING OF CONTRACTUALIZATION IN THE PHILIPPINES

"Without contractualization, companies would be forced to make all employees regular which is not practical and would kill the business." (Taus, 2016). As one of the promises President Duterte uttered during his presidential campaign, banning contractualization is one of the most controversial labor practices in the Philippines and the most talked about issue among employees across the country. With all the pleads and rants of the workers about this issue, total banning and prohibition of contractualization must not be implemented. Despite the benefits they can get, removing contractualization would entail a lot of cost in having all the employees regularized. This will also stifle employment growth and it will create various repercussions not just for the business but also for the Philippine economy as a whole.

While contractualization is a disadvantage to the employees, it is an advantage to the employers and the companies. The practice of contractualization prevents contractual employees to attain job security and deprives them of acquiring mandated benefits provided by the law. When all of the employees will be regularized, then it will entail a lot of cost to the business which is perhaps more than double what contractual workers will get sans benefits. As the European Chamber of Commerce of the Philippines (ECCP) president Mr. Guenter Taus stated, removing contractualization would come at the expense of the employees. Supported with what Ong (2016) said, given the benefits set by the government which is a privilege to regular employees such as vacation leaves, sick leaves, maternity leaves, Social Security System, and the like, employers pay around 7% of the total payroll costs in behalf of the employees. If the company practices contractualization, these entitlements would be reduced. Moreover, contractual workers are also supplied by agencies which encourage companies to engage with such. Through this, companies enjoy the ease of recruitment which is a save of time because of its simple procedures. Administrative costs will also be saved because companies need not to deal with hiring employees by themselves which is usually done in hiring regular ones. This means hiring contractual employees will eventually increase their profits. This will result in substantial cost savings then it can contribute essentially to economic growth.

Docena (2016) said, contractualization increases the profit of individual firms but more people suffer as a result. This is because contractual workers receive less than what they should be receiving if they are being hired as a regular one. They are being deprived of the resources the workers could use can lift themselves from poverty. This means that when employees are being regularized, they can be more productive at work due to the benefits they can get. On contrary with this, regularizing workers will lead to terminating workers which have not reached the standards of the business and will retain those who qualify, thus accelerating the unemployment rate. This will also lead to making regular workers work longer for the same wage or by making them work faster which is detrimental to health. Based on what happened lately in PLDT, workers gathered and conducted a rally about allowing the 12,000 contractual workers to return to their company. As one of the protesters answered an ABS-CBN news reporter, their working hours were extended due to lots of jobs to be done. These circumstances exhausted them and lessens their time for the family. Additionally, Lopez (2016) said that the practice of contractualization contributed a lot to total employment. With 5.4 percent of the unemployment rate as of September 2018 with the practice of contractualization, ending the said labor practice will eventually increase the 3.48 million people who are unemployed. This act would accelerate the unemployment statistics that the Philippines currently have. Nevertheless, the Employers Confederation of the Philippines (ECoP) president, Mr. Donald Dee, said that their group was willing to bite the bullet with a strong belief in having better productivity of the workers when regularized. But according to Ridenour (n.d) from Kelly Services, employing both contractual and regular workers will result in a more efficient and effective workplace, thus better productivity. The said practice then will lead to more job opportunities and vacancies for Filipinos.

According to Lopez (2016), people and the government must also acknowledge that many investors think it wise to risk and put their money in the Philippines because of the cheap labor cost, which is brought by the practice of contractualization. With the regularization of contractual employees, investors might lift their investments due to the high cost it entails to the business. If this happens, the state of the economy of the Philippines will drastically drop because businesses will no longer be stable. Based on what Manapat (2018) said, the government collects taxes from households and firms to fund public services. This shows the harmonious relationship between business and the economy. Referring to Trading Economics (2018), the Corporate Income Tax in the Philippines is 30 percent yearly. Revenues collected from companies are an important source of income for the Philippines to be used in government expenditures. This shows that businesses and entrepreneurs are one of the biggest taxpayers of the country which helps with the development of the Philippines. In addition, Jeric (2016) said that the practice of contractualization is being implemented in the country because of its poor economic growth. Considering the state of the Philippines' economy growing by a rate of 6.8 percent as of the first quarter of 2018, Cid Tereso from the Economics Program at the University of Asia and Pacific has argued that it is the right time to finally end the said labor practice but it is simply not enough to sustain the country in the long run. It depicted the must of having contractualization in the Philippines in order to maintain its economic growth. Additionally, ending contractualization also stifles employment growth which is not beneficial to the economy. Creating more job opportunities will help cater to the economic growth of the Philippines even more. Banning contractualization might have a sharp increase in the unemployed which can create greater problems, especially to the economy. According to Santos (2016), terminating the practice of end of contract or "endo" will lead to fewer opportunities for vulnerable employees to become permanent employees but will also lead to an increase in the unemployment rate and a decline in the employment rate. This is a great indicator of the importance of contractualization in balancing the Philippine economy and its continuous growth along the way.

Even though the voice of netizens regarding this issue is heard across the country, the total termination of contractualization must not be executed. Despite the benefits that employees can get when regularized, the cost it can entail to the business is a threat to their business to operate still. This act can also cause a drastic drop in the employment rate in the country and these circumstances might affect the state of the Philippine economy.

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