Sunday, 14 August 2011

Contractualization: An Economic Constraint?

Have you had that experience wherein you wanted to buy something but you would not choose to do so because you just wanted to save your money for the future use? That future use means that there will come a time when you will be out of work and you will face that dilemma again of finding one... that situation was brought by legalizing Contractualization.

Contractualization means replacing regular employees with temporary workers who normally don't get the same benefits and salary compared with the regular ones. These temporary workers are also known as contractuals, trainees, apprentices, helpers, casuals, piece raters, agency-hired, and project employees, among others. They more likely suffer from lack of security in the workforce as they were just hired to relieve on a given task in a defined span of time. Even though they are getting less, their work is undoubtedly very important to the operations of the companies that acquired their services.

The traditional pattern of employment before was a full-time work with an unlimited duration, protected against an unjustified dismissal by an employer. However, as the time goes by there came a time wherein labor flexibilization emerged as the preferred set-up in the Global Economy. Contractualization became evident on the the issuance of DOLE order no. 10 in 1997 which loosen up the rules on contracting or sub-contracting. DOLE Order No.10 was repealed through DOLE Order No. 3 issued in 2001 only to be reinstate through DOLE Order No. 18. in 2002.

The idea as mandated by the law is this: "It is legitimate contracting or subcontracting if the contractor or subcontractor has substantial capital or investment such as corporations, tools, equipment, implement, machineries, uniforms, protective gear, or safety devices actually used in the performance of the job, work or service contracted out. It is the prohibited “labor-only” contracting when the person supplying the workers to an employer does not have the substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer" 

If this will be explained in a simple approach it's the same as hiring a security guard from an agency. Security guards are there not to be part of the main business but just to defend or assist the operation such as the bank, pawnshop or any other establishments that will be needing some security. The tools and the training will be provided by the agency and not by the company itself. It will only fall under labor-only contracting which is prohibited by the law if these particular employees will be deployed to perform services that are directly related to the company's nature of business. Unfortunately, contractual employment is being used as a disguise from labor only contracting method.

As provided in an article from Wikipilipinas, Contractualization of labor is favorable to the employers in more ways than one:
  1. Union and strikes are prevented as workers as strictly they are not employees of the employer or principal. A five-month or less contract also does not give the employees a chance to organize.
  2. Contractual workers replaced retrenched regular workers.
  3. Most of the contractual workers do not have benefits such as Philhealth and SSS.
  4. Contractualization further depresses the already very low wages of workers. 4/10 respondents revealed that they are paid below the mandated minimum wage. From this income, they spend as much as P500 up to P1,000 in application requirements. They also have to pay for the cost of their uniforms and other work paraphernalia.
  5. Contractuals cannot refuse overtime work which during the peak season means staying beyond until 10 p.m., though the labour code prohibits this as inhuman practice.
  6. Contractualization brings down the workers’ self-esteem. As a whole, management looks down on workers but their biggest contempt is reserved for contractual.
  7. It nurtures and reinforces the already prevailing culture of docility and subservience that have been inherited from the feudal-patriarchal culture introduced by Spanish colonizers. 
There were so many factors why this law was passed or implemented.One thing I know is that besides being a venue of exploitation to our fellow workers, this is one of the economic constraints that we are greatly facing. Let's go back to my first paragraph, that particular question pertains to the obstacle in our purchasing power. If people are not secured on where they will be getting their next earnings then the tendency is just to save and not to spend their money right? the money will not go anywhere in the circulation, thus preventing the currency to flow smoothly. It is definitely not healthy to have that set-up because if you will not give, no one will also be getting any. If one doesn't have a stable work;  he/she won't buy new clothes..the Department store will not earn profit, the clothing manufacturers will not be getting orders to be done, their employees will not do anything but to wait for the shutdown of the factory then all of us will be in doom, this is just a domino effect.

On the other hand, there will be no stable people who will handle the company's operations, that is why no quality service or work will be produced as well. However, the battle for cost reduction on these organizations are greater than those of the given scenarios above. That is why don't be surprised if we continue to have these challenges of unemployment and poverty in our country.



  1. i am against contractualization, kawawa talaga mga manggagawa sa labor policy na ito ng gobyerno...

    i am handing over an award for you...please please claim it

  2. Please check out DOLE DO 18-A, s. 2011. Your points don't have much basis. Terrible blog.