Contractualization bad for workers and for business

Published by rudy Date posted on April 27, 2010

Last Monday, The Manila Times published a news story where Nacionalista Party senatorial candidate Susan “Toots” Ople urged the Bangko Sentral ng Pilipinas (BSP) to recall its Memorandum Circular 268, which allows banks to freely subcontract out in bulk jobs normally performed by their regular employees.

“When permanent bank staff positions are demolished wholesale, regular employees and their families not only lose their source of livelihood, the labor unions that protect those [workers] left behind also get smashed or diminished considerably,” Ople said.

“Banks used to provide some of the most durable jobs in the country, with many personnel looking forward to stable employment until they grow old and retire. This is no longer the case now. Regular bank workers feel threatened by the BSP circular,” she added.

The BSP circular allows the subcontracting to independent service providers of eight banking operations or divisions: credit investigation and appraisal, credit cards, information technology, clearing, security, messengerial, tax management and financial accounting.

“This is basically labor-only subcontracting, where the contractor merely recruits, supplies or places workers to perform a job, work or service for the principal, in this case the bank,” Ople said.

Labor only subcontracting is illegal. The Department of Labor and Employment reiterated this in Department Order 18-02, Series of 2002.

And no less than the National Labor Relations Commission, the Court of Appeals and the Supreme Court affirmed its illegality in the case of Joel Taripe in 2008.

Article 280 of the Labor Code provides two exemptions for fixed-term contracts: 1) When the term of employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time the worker was hired; and 2) when the work or service to be performed is seasonal and the employment is only for the duration of the season.

The Supreme Court upholding the NLRC and the CA’s decision favoring Taripe said that while Article 280 does not proscribe or prohibit an employment contract with a fixed period, “it does not necessarily follow that where the duties of the employee consist of activities usually necessary or desirable in the usual business of the employer, the parties are forbidden from agreeing on a period of time for the performance of such activities.”

The SC said further: “What Article 280 of the Labor Code, as amended seeks to prevent is the practice of some unscrupulous and covetous employers who wish to circumvent the law that protects lowly workers from capricious dismissal from their employment . . .”

Also, the lack of job security because of rampant contractua-lization has led to a much-noticed deterioration of services.

Workers have been taking these contractual jobs out of desperation. The jobs are offered on a ‘take it or leave it’ basis. If they don’t take the job, there are others in line, more desperate. And so they do, believing any job is better than no job at all. It’s the same principle used by those companies who could well afford to pay the minimum wage and other mandated benefits but don’t. If you don’t like what we’re doing then go somewhere else, they say.

What these companies fail to realize is contractualization negatively affects their services in the long run. It loses them customers and profits.

How much motivation is there for workers to do their jobs well if after five months they would be out of work anyway? In some cases, the unscrupulous workers would even try to take advantage of their short tenure with a certain company to earn as much as they can illegally.

Nowadays, for instance, cable companies are losing a lot of profits because of cable pilferage, those “colorum” cable connections. Do they realize that a lot of those who offer these illegal connections are their own contractual workers? These workers, knowing they’d be jobless in five months, offer to provide these colorum cable services, as part of their “extra-income.” They don’t feel any loyalty to the company, and they even justify what they’re doing as payback for not being given security of tenure.

In many service-oriented industries like restaurants and hotels, services have suffered because owners and management thought they could cut costs by resorting to contractualization.

Have you noticed how many of those first class hotels you once frequented do not offer first class service anymore? The same goes for those favorite restaurants. You can blame contractualization for that as well.

Even some nurses in hospitals in the country are now hired on a contractual basis. And yet we complain about the exodus of our medical professionals to better-paying jobs abroad.

In telecommunication companies what were once regular jobs like installing lines, repair services, maintenance work are contracted out nowadays. Crews are paid usually on piecemeal or on a per job basis. These crews have no rights, they are paid less, they have no benefits, they get less training or none at all. They are not organic to the companies they serve and could lose their jobs anytime. Again, how can you expect them to provide quality service?

As Ople noted, those engaged by subcontractors end up mistreated as mere temporary or part-time workers, and deprived of statutory wages and benefits, including mandatory social security and health insurance coverage.

Ultimately though, both workers and the companies suffer. Contractualization, as it turns out, is not just bad for the workers. It’s bad for business as well.  –ERNESTO F. HERRERA, Manila Times

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