His war on drugs well underway, Philippines' Duterte now tackles labor reform

November 2, 2016 3:53 AM EDT

A commuter uses his mobile phone as a train arrives at a station in Pasay City, Metro Manila July 7, 2008. REUTERS/Cheryl Ravelo/File Photo


News and research before you hear about it on CNBC and others. Claim your 2-week free trial to StreetInsider Premium here.

By Manolo Serapio Jr and Neil Jerome Morales

MANILA (Reuters) - In four years, Ivan Rey Tan worked with seven Philippine businesses. From a doughnut shop to a baby products store, the firms only hired workers on short-term contracts to rein in costs, and none of his jobs lasted longer than five months.

Tan is among 28 million Filipinos employed on short-term contracts, an astonishing 70 percent of the Asian nation's workforce. Now, new President Rodrigo Duterte's government is aiming to bar the employ-on-contract practice because it offers no job security, health or other benefits and tramples on workers' rights.

The government is still to amend any of the labor laws, but Duterte has already warned employers to stop hiring workers on such contracts.

His plans have not created as much of a furor as his controversial war on drugs, but employers in one of the world's fastest growing economies are up in arms. They say ending short-term contracts would mean up to 30 percent additional costs for businesses, forcing them to hire fewer people and driving away prospective investors.

If the state forces all companies to make all their employees permanent, "we will bring the government to court," said Donald Dee, head of the Employers Confederation of the Philippines. "You cannot do that."

"In today's business environment, there is no such thing" as permanent employment, Dee said. "If they push that, no madman would do business here."

Other employers said pushing the reform could mean a downturn in the Philippines' enviable rate of economic growth, which at 7 percent in the second quarter was among the highest in the world.

Philippine law allows employers to hire workers to meet demand at peak times. These contracts typically span five months to avoid a six-month rule that would require employers to make an employee permanent.

The practice is popularly called "endo", an abbreviation of "end of contract".

In 2011, the labor agency allowed companies to engage contractors to supply workers for short-term jobs, helping spread the practice of "endo" to job-intensive sectors such as retailing and manufacturing.

Duterte has said he wants the number of jobs with these contracts halved by year-end and eradicated next year.

There are pending bills in Congress to end such contractual work in what would be the first overhaul of the Philippines' labor law since 1989 but no legislation has yet been passed.

Nevertheless, Duterte ordered an inspection of all companies shortly after assuming office on June 30, warning that any company that would not end short-term contracts risked closure.

"You will not only lose your money, you will lose your pants," Duterte said on Aug. 1. "You are creating a very serious dissension in the society."

COSTS COULD CLIMB

Duterte has a "tendency to be really forthcoming and forceful," said Edmund Tayao, a political science professor at the University of Santo Tomas.

"Regardless what the president says, if there are legal options available for business groups, then they have every reason to fight it," said Tayao.

"But of course, if you are a businessman and you would like to have less headaches, you'd try as much as possible to comply."

Labour Undersecretary Joel Maglunsod estimated that up to 70 percent of the country's 39-40 million workforce are on short-term contracts.

"A worker is not a commodity, a machinery or instrument of production. We should respect their dignity," said Maglunsod, a former labor rights activist.

"Contractualisation is a neo-liberal policy, an attack on the livelihood, salary and jobs of workers," he said in an interview.

Although it's just four months into Duterte's term, 16,626 contract workers have been made regular staff, said Maglunsod.

But Dole Food Company, one of the firms that the labor agency said had recently made 554 contractual staff in its banana cultivation business permanent, was unsure where the agency got its number from.

"While we hire workers as needed from time to time, we haven't hired such a large number of workers at one time in the recent past," Dole lawyer Marianne Aniceto said in response to a Reuters query. But she said Dole outsources "certain services to cooperatives."

Maglunsod said the government also hired workers on contract and more than 50 percent of state employees were short-term. "There's budget to do it (make them permanent) if the government wants to," he said.

The labor reform plan "can increase the operating cost in certain industries which are very labor intensive," said Barclays Bank economist Rahul Bajoria.

To limit any potential economic damage, the government could resort to imposing fines and penalties "rather than shutting down certain businesses that would be negative for the economy because you're directly putting people out of jobs," Bajoria said.

Tan, who has worked at seven jobs in four years, said he was happier now that he was employed at a toy store which signed him up to a longer, one-year term through a contractor.

But Duterte was clear he wants contract jobs gone for good, warning all companies in August: "If you do not take care of the workers, then I cannot take care of you."

(Editing by Raju Gopalakrishnan)



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In






Related Categories

Reuters

Related Entities

Barclays

Add Your Comment