Phase-out of contractualization unfavorable to MSME – Concepcion

By Richmond Mercurio (The Philippine Star), September 27, 2016

MANILA, Philippines – Phasing out completely the practice of contractualization is bad for business, particularly to the micro, small and medium enterprises (MSME) which account for 99 percent of registered businesses in the country, presidential consultant on entrepreneurship Joey Concepcion said.

“In the issue of contractualization, I had the chance to talk to him (President Duterte) and tell him, Sir you know we cannot kill contractualization. It will kill everybody. It will kill MSME development because many of them cannot hire their own human resources people. They can just get their service provider and the service provider provides them the labor,” he said.

The Department of Trade and Industry (DTI) earlier presented a win-win solution which aims to put a stop on the abuses under contractualization such as end-of-contract or “endo” schemes.

“Under that concept you will really kill endo. There is no need for endo to continue with service providers being there. Endo will automatically die (because) it’s either you hire him (employee) or you hire a service provider,” Concepcion said.

Under the proposed win-win set-up, workers can be hired by service providers as regulars, receiving full benefits such as leave credits, 13th month pay, as well as retirement, social security and health insurance plans, among others.

Companies, meanwhile, will have the flexibility to either directly hire workers as regular employees or outsource them through service providers, in view of seasonal job functions.

The Employers Confederation of the Philippines (ECOP), however, has earlier called for several adjustments to be made on the proposal to make it a true win-win solution for both business and labor.

ECOP president Donald Dee said putting the responsibility heavily on the service providers as proposed under the win-win setup may not be as easy as it sounds given these agencies’ limited capital.

Concepcion, however, said he has met with Dee and the employers’ concerns have already been addressed.

“Of course the service fee will have to increase to some extent because definitely the service providers will now have to charge retirement pay. That will be a pass-on cost. The fees will be going higher because there will be other costs. So service providers will have to increase their capital,” he said.

“There’s no objection from the employers at all because you give the employers the choice. If they find the cost of service providers high, then hire him (employee) as a regular,” Concepcion said.

Business groups, for their part, have expressed support to the administration’s plan to put an end to the abusive contractualization practices in the country such as endo.