History of contractual labor

Contractual labor in the Philippines has been around since the 1970’s, when President Ferdinand E. Marcos established the export processing zones—now better known as the economic zones and technology parks.

Contractualization has functioned as an incentive to lure prospective investors to the country, in addition to handing out investment perks such as tax holidays.

To better protect the interests of these investors, the Department of Labor and Employment (DOLE) released DOLE order no. 10, paving the way for the exploitation of workers through contracting and subcontracting.

Basically, contractual employment became a disguise for labor-only contracting—an illegal arrangement where the job contractor or subcontractor recruits the worker, but has no real capital invested and may not even manage its own “employees.”

So what does this mean for the working class?

It means that gradually, organized regular employees were replaced by contractual workers with lower wages and fewer benefits.

Labor-only contracting

The Labor Code clearly defines the illegality of labor-only contracting, although many employers still practice it.

In 2001 DOLE Order No. 10 was repealed through DOLE Order No. 3 only to be restored in 2002 through DOLE Order No. 18.

The Department Order 18-A series of 2011 laid down rules implementing the Labor Code Section 1, Articles 106 – 109 guiding principles.

Order 18-A states: “contracting and subcontracting arrangements are expressly allowed by law and subject to regulations for the promotion of employment and the observance of the rights of workers to just humane conditions of work, security of tenure, self-organization and collective bargaining. Labor-only contracting as defined herein shall be PROHIBITED.”

Nevertheless, contractualization has proliferated ever since. It has been taken advantage of not only by the private firms but even in government agencies.

In a 2016 press statement, Sen. Kiko Pangilinan noted that the government is the biggest employer in the country, with about 1.4 million civil servants.

Of this, casual (seasonal) employees were 17,182 or 11.6 of the total non-career government personnel while the number of contractual employees was at 31,882 or 21.5 percent.

In this way, the exploitation of worker rights has been rampant, even though the government publicly announces that they have created more jobs and attracted investors for the Filipino people.

But the government never reveals the effects of DO-18 on the working class.

Contractual labor and the working class

Although the Philippines is ranked the third most desirable work force globally out of the 75 countries worldwide in the 2016 contingent workforce index (CWI) released by the Manpower Group Solutions, a grimmer truth lays unaddressed.

In reality, if an employee is contracted-out he/she is often paid below the stated minimum wage and with minimal or no benefits at all. Meaning his/her purchasing power for a decent living is neglected.

Take the case of Emil (not his real name) an employee from Pampanga. As an operations manager, he receives a monthly wage of P6,000 or P230 per day. In Pampanga the minimum wage is P349 per day or P9,074. So Emil is short of more or less P3,000 pesos.

The Ibon Foundation, citing data from the government-run Philippine Statistic Authority (PSA) and the Department of Labor and Employment (DOLE), claims that 31 million Filipino workers have not received the correct minimum wage since 2013. This amounts to 46.1 percent of the total 67.1 million Filipino workers.

Ibon also noted that only 16.5 million workers or 24.6 percent of the total workforce have been receiving the minimum wage since 2013.

These statistics indicate that the vast majority of Filipino workers are paid at or below the minimum wage—a wage that can scarcely support an individual, let alone a family.

As a result, to compensate for his/her personal and family needs, workers must look for extra income. Ironically, as regular employees decrease casual and contractual labor increases.

Workers without rights

In essence, contractualization is a practice that violates the right to work humanely and with dignity. It also denies the existence of an employer-employee relationship, avoids the regularization of workers, and prevents workers from enjoying benefits accorded regular workers.

As such, contractual workers have no job security, social security, PAG-IBIG and other benefits enjoyed by a regular employee—and yet they perform the work of regulars, every day.

As of the 2015 Annual Labor Force Survey data, the Philippine labor force is 41.342 million-strong. One-third or 30 percent of these workers are contractual labor. CPM