Labor contracting, casting the stone (Part 1)

Those who know me would definitely not imagine me as playing devil’s advocate on anything ostensibly unpopular. But I find it rather fascinating and makes for an interesting conversation. Take, for instance, what’s happening in recent months which again brought to the fore the issue of labor contracting and temporary employment arrangements.

I am sure a lot of you are aware of the mounting calls from various labor groups to end ALL forms of contractualization. And certainly, a lot of you have gossiped about DoLE’s list of companies suspected of being engaged in labor-only contracting. Admittedly, the popular view is that labor contracting is an exploitative arrangement with labor getting the short end of the stick.

So let’s ask the hard questions: Is labor contracting intrinsically evil? Is it really an anti-labor arrangement, and as such, there is no room for it in Philippine society?

Now, imagine yourself as a business owner involved in mainstream commerce – let’s say manufacturing or distribution. Further imagine yourself (the “principal”) as having contracted out certain aspects of your business to another person (the “contractor”) who has his own employees – like packing your products (literally, just putting your products in boxes). There are therefore three parties involved: you, the principal, who decides to farm out work, the contractor with the capacity to perform the work assigned, and the workers under the employ of the contractor tasked to accomplish the work assigned. This is a valid outsourcing arrangement. We should differentiate this from contractualization which we have come to know as “endo,” a scheme used by some employers whereby workers are engaged for fixed periods in order to prevent the workers from being regularized.

For a business owner, it makes a lot of sense to outsource or contract out certain aspects of operations. First, hiring a contractor provides flexibility and efficiency in accomplishing incidental tasks better handled by specialist contractors for superior output and faster turnaround. Second, it enables permanent staff to concentrate on core business rather than focus on the incidentals. Finally, it allows for temporary cover for a permanent staff job or work that needs doing. Our current labor laws seem to align with this thinking too, as the example above may be the simplest form of a valid labor contracting arrangement.

On the other side, the arrangement provides employment opportunities to individuals who may not necessarily have the skills and qualifications for core staff positions with the principal right off the bat. For all the bad that has been said about labor contracting, it is undeniable that it is an industry that generates jobs for regular people. If all forms of labor contracting are prohibited, is it really a foregone conclusion that employers will directly hire additional employees to perform what may be considered incidental tasks?

Not all forms of labor contracting are illegal, and for that matter labor contracting is not bad per se. It may very well be the case that the root of worker dissatisfaction is not that the law allows for certain forms of labor contracting but that illegal practices normally associated with labor contracting are so prevalent that they overshadow whatever good this practice has to offer.

There will always be obvious violators, and worse, those who circumvent the law to make it appear as if they are complying. But eliminating all forms of labor contracting may not be the sound solution to this concern. Changes in current regulations should not be done at the expense of those business owners who engage in genuine and valid labor contracting or outsourcing. The government should as it does, demand strict compliance with current laws and rules, such as Department Order No. 174-17, and at the same time it can review the circumstances and realities surrounding its implementation.

Contracting out work is no different from the government letting the private sector experts perform some aspects of government service – say public infrastructure, mass transportation, water distribution or receipt of tax payment. We can all benefit from smart allocation of financial and human resources. Simple logic.