Polytechnic University of the Philippines

Sta. Mesa, Manila

Managerial Economics
Formulation of Economic Policy

Economic Policies in Favor of Contractual Workers:

Means not to End but to Improve Treatment under
Contractualization

Submitted by:
Abdun, Angelica Jean
Quintanilla, Maria Joyce
Redonga, Georgie A.
Sambo, Joseph
Timpog, Mark Angelo
BSA 1-16

Submitted to:
Ms. Aldhessa Joyce A. Morillo

March 19, 2019

 Contents

I. Introduction 1

II. Background of the Study

Overview 3
History of Contractualization 3
Related Study on Contractualization in Philippines 6
Current Information Surrounding the Issue 8

III. Formulation of Economic Policy

A. Goal 13
B. Policy Options 13
C. Chosen Policy 14

IV. Conclusion 15

V. Bibliography 16
 Introduction

Contractualization or labor contractualization is the replacing of regular workers with

temporary workers who receive lower wages with no or less benefits. They do the work of
regular workers for a specified and limited period of time, usually less than six months. The
work they do is “desirable and necessary” for the company’s survival, but they never become
regular employees even if they get rehired repeatedly under new contracts (Paqueo, 2016).

In this current administration, to abolish contractualization is one of the current issues

the state is facing. Labor contractualization has been a subject of discussions in the congress and
among Filipino citizens. This arises due to the issues of unemployment and under employment. It
is undeniable that most of the biggest businesses in the country are involve in this situation.
Latest news includes an article about Anak Pawis Partylist Rep. Ariel Casilao filing a measure
abolishing the contractual employment scheme in the country. During the campaign period,
President Duterte vowed to abolish the contractualization scheme, which he described as unfair
labor practice and tool of exploitation against the working class. The main purpose of every
business is to gain profit. The most common way to achieve this is through minimizing the
expenses of the company. Most business owners today engage in contractualization of
employees. The jobs available for them usually do not require a college degree and therefore
would give them minimum wage. Also, contractual employees do not receive any benefits such
as SSS, Philhealth, and Pag-IBIG contributions unlike the regular employees. This is one
evidence that businesses can lessen their costs because they are not required to pay high amount
of salaries to their workers. This situation is not advantageous to the employees since it does not
give the security of a permanent job. It also cannot develop their skills properly given the period
of time they have for one job and the great possibility that they would have another job few
months later which is different from that of the current. The businesses may have lesser expenses
however the quality of services they offer may be compromised thus, affecting their sales and net
income.

In our country, which is the Philippines, there is an estimated 1.3 million contractual
workers as of the year 2017 and based on other sources, it is still rapidly increasing. On the year
2017, DOLE targets to regularize at least 150 000 of 200 000 contractual workers and up until
now, they are still trying to craft new plans to lessen the number of contractual workers here in
the Philippines. (Cruz, 2017)

The contractual workers have different reasons why they are taking these temporary jobs.
The main reasons are: (1) the job sought is usually only available as a temporary or "seasonal"
job, (2) a temporary job is preferred by the job seeker, lastly, (3) a temporary job is all the job
seeker can find in their local job market or field, at the current time. The advantages of taking
temporary jobs are: (1) the temporary job may be exactly the job the job seeker wants, with
a time limit for the employment commitment; (2) it provides an income stream while the "real"

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job search continues. (We called this the "salary continuation plan" in the past; (3) it fills a gap
on the resume - a gap in experience needed for the next job or a gap in the resume's employment
history; (4) it may give the job seeker a chance to "test drive" a job, an employer, or an industry;
(5) the job seeker has an opportunity to start their career migration to a new field; (6) sometimes,
it provides both income and benefits (health insurance, etc.); (7) sometimes, it opens the door to
a permanent job, often referred to as "temp-to-perm." These jobs give both the employee and the
employer an opportunity to see how they work together. But sometimes, with some luck,
contractual workers sometimes receive the same benefits just like what the regular workers
received.

On the other hand, the disadvantages of temporary jobs are: (1) temp jobs are, by
definition, short term, usually less than 6 months, often less than a week; (2) many temps report
feeling isolated and not well-respected by other employees; (3) most temps are not paid top
dollar for what they do, unless they have a skill that is quite scarce; (4) depending on the agency,
you may find that you have fewer benefits (sick days, paid vacation, for example); (4) the site
manager and other employees may not be particularly helpful when you are in a learning mode.
(JobHunt.org)

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 Background of the Study

Overview
The word Endo is derived from an abridged version of the phrase "end of contract". Endo
is also sometimes referred to "5-5-5", referring to the number of months until a non-regular
employee’s termination or end of contract. Under the Labor Code of the Philippines (PD 442),
employers may employ people under a probationary status of not exceeding six months. Under
this system, the worker's employment contract ends before the six months by their employer.
After the six-month period, employees then become regular workers, entitled to several health,
security, and insurance benefits prescribed by law.
Contractualization is one of the most controversial labor practices in the Philippines.
Since its adoption in 1974, the Labor Code has been amended and attached with several
implementing texts. As of June 2016, there are an estimated 356,000 probationary workers in the
Philippines.
Since the initial drafts of the Philippine Labor Code up until today, there has been no
drastic action on contractualization. This topic on Endo has been the subject of many debates
ranging through various presidencies each promising to end this exploitative labor practice with
each presidents contribution being a minute change to the Philippine Labor Code. Stances on this
issue are divided, there are some who point out how the practice is exploitative and illegal, others
who say it's Contractualization is essential to economic growth, while there are others also
talking about how it affects the workers who are subject to it. Despite its history having made the
practice legal, later revisions to Philippine Labor Laws have deemed the practice illegal.
However, despite the controversy it is still regularly employed by major companies in the
Philippines to cheapen labor fees.

History of Contractualization
Contractualization has its roots tracing back to 1974 under the rule of Ferdinand Marcos
when Ernesto “Boy” Herrera helped draft Presidential Decree 442. This decree which Marcos
eventually passed, would give the provisions and grounds for the contractualization of workers in
the Philippines.
The Labor Code of 1974 introduced the concept of probationary employment to the
Philippines and Under Article 281 it states that "employers are allowed to hire people under a
probationary status for up to six months. These 6 months are used as a trial period for the
employee. If the employee is allowed to work after the 6 month of the probationary period,
he/she will be considered a regular employee." which upon further reading continues as follows
“the services of an employee who has been engaged on a probationary basis may be terminated
for a just cause or when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his engagement.” If an

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employee is unable to show that he/she possesses the necessary skills to keep the job, he/she may
be terminated from employment."
Effectively, Article 281 and its legal loophole was spotted by companies and since then
has been used as a main basis for laying off workers in order to avoid extra costs for regular
employment.
After the coup of the Marcos administration and the ushering of the Aquino
administration which lasted from 1986-1992, the Herrera Law, also known as Republic Act 6715
of 1989 was passed. It was this law which gave the first major revisions to the original Philippine
Labor Code drafted earlier during the Marcos Presidency. This revised Philippine Labor Code
was amended to fight against the discrimination against women in the work place and aimed to
extend the rights of workers under employment. However, this revision under the administration
of Corazon Aquino did not tackle contractualization directly and effectively. For example, Art.
279 of the labor code was amended to provide better security of tenure for workers. This article
states that:
"In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An Employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement."
This failed to recognize the situation of those employed under a probationary status.
Regular employees could not have their services terminated without a just cause, but in order for
a probationary employee to attain this regular status, he/she would need to work more than six
months.
Upon the end of the Corazon Aquino administration, Fidel V. Ramos, a known military
leader vowed to end contractualization to aid the plight of his suffering Filipino people and thus
had the Philippine Labor Code amended to extend the powers of the Secretary of Labor along
with the powers of the regional directors in order to more efficiently handle violations of the
Labor Code and hopefully taming and curbing the growing problem of exploitative
contractualization. The amendment is quoted as follows, Article 106 of the Revised Labor Code,
“The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit
the contracting-out of labor to protect the rights of workers established under this Code.” This
amendment to the Philippine Labor Code effectively gives the power of ending or continuing
contracting-out of labor into the hands of then DOLE Secretary.
Then currently active DOLE Secretary Leonardo Quisumbing issued a Department Order
10 on May 1997 strengthening the contracting out of labor practice by giving the employers
more allowances whilst safeguarding employee rights. It was this Department Order 10 of DOLE
Secretary Quisumbing which propagated the concept of agencies through "Permissible

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contracting or subcontracting." It was here when employees started coining the word Endo in
response to the 5 months - 5 months - 5 months work schedule of most contractual employees.
It was also this change in provision on the Philippine Labor Code and the DOLE
Department Order 10 compounded together which made the problems of Endo worse off in the
administration of Fidel V. Ramos.
Under Estrada Administration, the growing Endo Contractualization practices in the
Philippines, also came the growth of a myriad of worker abuse complaints which gave rise to
multiple worker protests and led to then DOLE Labor Secretary Patricia Sto. Tomas to pass
DOLE Department Order 3 in 2001 which served as a revocation of the previously passed DOLE
Department Order 10. This however, also removed the changes to the rights of a contractual
employee mention in Department Order 10. These rights included giving contractual employees
the same benefits as regular employees, a promise of proper working conditions, service
incentive leave, rest days, and overtime pay among others. Department Order 3 also had a
section which protected current contracts already in place. Existing contracts between companies
and workers had to be fulfilled. Both parties still had rights to the stipulations mentioned in their
current contracts.
The DOLE Department Order 3, though it did revoke the previous DOLE Department
Order 10, was only a temporary solution.
During Rodrigo Duterte’s campaign for the 2016 Presidential Election, one of his
promises was the phasing out of contractualization and improvement to labor in the Philippines.
Upon his election, he appoints Silvestre Bello III as Secretary of the Department of Labor and
Employment, who considers making all companies put at least 80% of all employees under
contract as per the president’s orders. By the end of 2016, around 36000 workers have been
regularized. Going into 2017, Duterte and Bello aimed for a new permanent policy that would
end labor-only contractualization by the end of February, but Bello wound up not signing it.
Instead he decided first for dialogue between the president and labor groups in order to get
feedback. Eventually President Duterte met with the labor groups as Bello drafts a new
Department Order that would stop labor contractualization. However, by March 16 Bello signs
Department Order 174 which sets stricter guidelines on contractualization but doesn’t
immediately illegalize it. Duterte however continued his stand against contractualization,
promising to sign an Executive Order against it. However, the Marawi crisis ends up postponing
the signing. As of 2018, no Executive Order has been signed by President Duterte regarding the
complete abolishment of contractualization. A rally was organized by labor groups on March 15,
2018 in protest against the president’s delay of the EO. Eventually on May 1, Duterte signs an
EO that would put an end to contractualization, although Labor Groups would criticize the
president for his actions since the one signed was not the draft agreed upon with them.
Last June 2016, the Department of Labor and Employment (DOLE) has started
inspecting establishments nationwide as a response to President Rodrigo Duterte’s issuance of an

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Executive Order (EO) banning endo and other similar contracting practices. As of April
2018, DOLE has inspected 99,526 out of over 900,000 establishments in the country.
According to an initial list submitted to the Malacañang Palace, DOLE states that there
are 3,337 companies suspected of engaging in labor-only contracting. Out of this
total, DOLE has confirmed that 767 companies practice labor-only contracting. This initial list
also notes that over 224,000 workers are affected by illegal contracting practice, and a total of
176,286 workers have already been regularized.

Related Study on Contractualization in Philippines

Contractualization is a form of employment globally used by firms, especially by

commercial and industry, to save costs. Firms may be enjoying the higher return on investment
because of fewer costs in training and not really requiring benefits to be given to the contractual
employees, yet they overwork or get underpaid. Miranda, H. J. (2017) stated that, Philippines, as
a country with cheap labor, investors are persuaded to vest in the country to give jobs to people
and to stabilize the economy. And in return, investments are being returned to the business
owners and investors as a fulfillment of their purpose in investing. Following the statement of
President Rodrigo Roa Duterte to end contract, Yamaha Motor Philippines, Inc., as a
manufacturing firm, might consider the instruction to avoid being closed or shut down, or if not,
the most possible thing to be done by the firm is to comprise their employees of 80% regular
workers and 20% contractual because of its nature. As a result, contractual employees’ morale
and human resource management are affected by the “end of contract” policy in the country.
Emotions, attitude, satisfaction, and outlook that comprises employee morale; and hiring,
training and development, and compensation and benefits operations of the human resource,
effects are presumed.
According to Dela Cruz, C. J., Laciste, S. M., and Santos, J. R. (2017), due to the
heightened competition as a result of globalization, firms must be able to adjust their
employment arrangements in order to improve their competitive position and to adapt to the
increase in demand. For this reason, firms are becoming more flexible when it comes to their
workforce relying on the practice of contractualization – a scheme where firms farm out jobs or
service to contractors within a predetermined period. It is said that contractualization has led to
greater efficiency and productivity, however, many labor groups advocate that contractualization
undermines the welfare of contractual workers. That is why majority of these labor groups
clamor for the complete abolition of contractualization. This study will determine the impact of
contractualization on employment. Through an analysis of the trends, regression results and
interviews, the researchers were able to identify the impact of contractualization on employment
particularly on its effect on job generation, job finding, and unemployment rate. Furthermore, the
study concludes with the finding that contractualization has generated greater employment and

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reduced the length of job finding. In addition, abolishing contractualization could increase the
unemployment rate.
In the aftermath of the 2016 election, labor leaders and their political allies pushed for an
immediate end to so-called employment “contractualization”, a policy proposal currently popular
with voters and politicians. The idea is for the government to tighten and reduce, if not prohibit,
the use of temporary employment contracts (TECs) and job outsourcing.
The Philippines, now one of Asia's brightest investment spots, has finally learned to grow
its GDP with diversified income sources from remarkable Business Process Outsourcing (BPO)
growth and Overseas Filipino Workers (OFWs) remittances. Such accomplishments are founded
on sound macroeconomic policies, efficiency-enhancing trade and institutional reforms, and the
rise of national productivity (World Bank 2016 and 2014). However, the country’s poverty rate
(Figure 1) remains stubbornly high with high income inequality. Moreover, inclusive growth
remains a dream due to lack of decent jobs where there is high youth open unemployment rate
(15.30 percent among 21-29 year old). This poses a challenge for the government to create an
enabling environment for the youth to find the right job match before it evolves into costly social
problems of political unrest, even criminality, and drugs.
According to Paqueo, V. and Orbeta, A. (2016), there is little doubt that the “endo”
practice is illegal. Therefore, to uphold the majesty of the law, the government is obligated to
end the practice. This fact, however, should not prevent citizens from questioning the wisdom of
the current worker regularization law and from examining the need for its amendment. More
crucially, the outrage against illegal “endo” practices should not blind politicians and voters to
the potential adverse consequences of further curtailment or prohibition of temporary
employment and job outsourcing.
The government needs to carefully weigh the effects of ending endo and of curtailing
other TECs. It appears that the need for immediately ending endo is overblown and could
significantly impede achievement of inclusive growth. Endo and other TECs play valuable roles
in keeping the Philippine economy efficient, competitive and inclusive. Ending endo would
adversely affect inclusive economic growth, depending on the aggressiveness and nature of
government response to the anti-contractualization demands. This adverse impact would be
intensified by imposition of more restrictions on other forms of TECS or, worse, by the passage
of pending congressional bills prohibiting all forms of TECs. Those bills run counter to the
lessons of Europe regarding liberalization of EPLs as a way to overcome the phenomenon of
growth with little job creation.
The pending bills would also undermine the country’s ability to prepare and re-position
its regulatory and policy environment for the impending Fourth Industrial Revolution - the
would-be new normal which will bring about massive destruction of current jobs and the creation
of new ones. Contrary to people’s mindset at present, what is needed, looking forward, is to
liberalize the use of TECs and find ways of providing better-paying jobs and income security

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under the would-be new normal. It is in light of the above observations that the government
should address the anti-contractualization issue.

Current information surrounding the economic issue/problem

Contractualization issue worries market

The local stock barometer yesterday sagged for the third trading session as foreign funds
continued to flow out of the local bourse while labor woes further dampened sentiment.

The main-share Philippine Stock Exchange index (PSEi) declined by 40.54 points or 0.53
percent to close at 7,602.36, tracking sluggish regional markets.

Local stock brokerage Papa Securities said the market had been lackluster due to lack of
immediate catalysts alongside continued net foreign selling.

In a research note written by Gio Perez, Papa Securities cited jitters over the list of
companies cited by the Department of Labor and Employment suspected of doing labor
contractualization. There were several publicly listed companies on this list, including Jollibee
Foods, PLDT and Sam Miguel Corp.’s Magnolia Inc.

Other non-PSEi stocks on the list included Century Pacific’s General Tuna Corp., Nickel
Asia’s Hinatuan Mining and flag carrier PAL.

“This is negative for the companies as wage costs can rise by as much as 19 percent if
employers include benefits such as SSS, Philhealth, Pag-IBIG and 13th month pay,” Papa
Securities said.

The day’s decline was led by holding firms, whose counter faltered by 1.16 percent while
the industrial, mining/oil and property counters also slipped.

On the other hand, the financial and services counters slightly firmed up.

Value turnover hit P6.1 billion. There was P169.13 million in net foreign selling.
There were 101 decliners that edged out 89 advancers while 54 stocks were unchanged.

The PSEi was weighed down by the country’s largest conglomerate, SM Investments,
which fell by 2.55 percent, while SM Prime also lost 1.32 percent.

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 URC fell by 2.58 percent due the decline in the sales of ready-to-drink tea C2 in the first
quarter.
Ayala Land, Metro Pacific, BDO and DMCI also lost ground.

On the other hand, Metrobank, BPI, Ayala Corp., JG Summit, Meralco and Jollibee slightly
gained.

Outside of PSEi, notable decliners included third-telecom player aspirant Now Corp.
Villar-led stocks sizzled. Starmalls surged by 50 percent while Golden Bria was up 1.96 percent.

Labor rights issues intensified under two years of Duterte (Part 2)

MANILA — The Philippines was among the top 10 countries across the globe to be
worst for workers, according to the Global Rights Index for 2018 released last June 8 by the
International Trade Union Confederation. In a scale of 1 to 5, the Philippines is a 5 with “no
guarantee of rights due to the breakdown of law.

The local labor rights group Center for Trade Union and Human Rights (CTUHR) said
the report “re-validated” their findings that the “Duterte administration is no different from the
previous governments or even worse in its attacks against the rights of Filipino workers.”

CTUHR recorded 29 victims of extrajudicial killings in the labor sector from June 2016
to March 2018. About 3,345 individuals whose labor rights have been violated were documented
by the CTUHR in 133 cases. These include “809 victims of red-tagging, 358 victims of threat,
harassments and intimidation and 98 victims of arbitrary arrest and detention resulting from
filing trumped up criminal charges.”

Dissent and protests, however, remain the labor sector’s recourse amid unresolved jobs crisis,
contractualization and low wages.

After President Rodrigo Duterte’s contractualization order on May 1, labor groups have
boldly criticized the administration’s move and described it as nothing but a ‘tokenistic’
approach to the long-time issues of contractualization in the country.

The workers’ newly constructed tent at the sidewalk across the headquarters of the
Department of Labor and Employment in Intramuros, Manila (Contributed photo / Bulatlat)

“Contractualization is getting even worse because of the continuous foreign investments

in the country which the government allows to implement contractualization. Because of this,
they (the companies) are free to create mechanisms to exploit the Filipino workers,” Joel
Maglunsod, a Labor Undersecretary who was once also a labor leader, told Bulatlat.

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Maglunsod also admitted that Duterte’s DO 174 did not differ with the existing labor laws on
labor-only contracting. “In essence, it only prohibits agencies to engage in illegal contracting, but
it could not supersede the existing laws that allow contracting and subcontracting.”

Maglunsod defended the Labor Department for its lackluster performance in the
promised banning of contractualization.

“We have submitted a workers’ version of demands to the president, even before he
signed the executive order last Labor Day. It is beyond the department’s accountability if the
president did not align his version with that of the workers,’” , the labor undersecretary
explained.

The Kilusang Mayo Uno (KMU) and other labor rights’ groups have criticized DOLE’s
action, calling it a mere ‘lip service.’ The labor center said they have had enough of nearly a
decade of the Labor Department’s “disregard and incompetence when it comes to the employees’
calls for regularization.”

Still the same calls uniting labor: ‘Junk government laws on contracting, subcontracting’
According to the contractual workers’ alliance KNM (Kilos Na Manggagawa), the so-
called “legal contractualization” or any employment of contractual workers is actually illegal.

“Any form of contractualization, whether seasonal, project-based or casual, whatever it is

called, as long as you are considered contractual, it is illegal,” said KNM chairperson Jen Pajel.

Despite hyping his administration’s thrust to end ENDO (end of contract signifying
contractualization), the contractualization policies issued by the Duterte government continue the
old policies’ distinction between legal and illegal contractualization. On March 16, 2017, Labor
Secretary Silvestre Bello III issued the DO No. 174 providing for stricter guidelines on
contracting and subcontracting. It does not ban contractualization; it just banned labor-only
contracting or “an arrangement where the contractor or subcontractor merely recruits, supplies,
or places workers to perform a job, work, or service for a principal.”

On Labor Day this year, President Duterte signed the EO No. 51 which banned illegal
contractualization schemes like end-of-contract. Labor groups were quick to denounce the
gesture as “nonsense.”

KMU said in a statement that the order does not end all forms of contractualization but
legalizes it. They also consider it to be worse than DO 174 as it sets labor contracting through
agencies as the standard for employment in the country.

PLDT contractuals in a picket in front of the Department of Labor and Management

office in Intramuros, Manila. (Photo from Defend Job Philippines Facebook page)

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 “Whatever kind of position and livelihood, all should be considered as regular workers
with direct relation to the principal owner,” Pajel said.

Revealing action from the DOLE

The Duterte administration and the Labor Department may continue claiming it is taking
action against contractualization. But its action reveals the opposite. For example, after the
dialogue between PLDT management and its workers facilitated by the DOLE on July 2, it
assured the workers the DOLE order to regularize thousands of them is final and executory.

DOLE reports that it is also intensifying its thorough inspections and assessments of
various companies, especially those involved in labor disputes.

But at present, the workers promised to become regular are worse off – those who led in
the struggle for regularization have become the first victims of termination by the management.
The termination simply came in the form of not renewing the contract of the agencies or labor
cooperatives “employing” them.

Yet, in response to labor rights groups’ demand not to limit the regularization order to
those “listed employees” of the DOLE, the labor department has promised to address it.

Meanwhile, simultaneous strikes revolving around issues of addressing regularization of

long-time contractuals are being launched by workers in different parts of the country – in
condiment giant Nutriasia; in sardines maker Uni-pak, in local fastfood giant Jollibee, in PLDT
Espana, and in global and American-owned kitchen maker Middleby Corporation in Laguna.
Before this, workers’ strikes have also been launched in export plantations in Mindanao.

Despite continuous threats of dispersal, their pickelines will thrive as long as calls for
regularization are not addressed, most of the striking workers vowed in forums they attended.

“We have been shunted aside numerous times by Nutriasia, local government units, and
the DOLE. Now, it is the picketline and not the law that we are fighting for,” Reymante, a
Nutriasia worker, said in Filipino in a press conference held by UP Center for International
Studies.

A Workers’ March is scheduled to mobilize thousands of workers next month, August

27. Leaders of various workers’ organizations said they hope to register all over the country the
workers’ grievances and demands amid deplorable situation of the labor sector under
contractualization and suppression.

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 “Workers are no longer hoping for a favorable action from the government to respect
their dignity,” said Pajel. So, Pajel added, they will take it into their hands to make sure the
government cannot prevaricate nor play deaf.

The workers’ protest action is eyeing to mobilize a hundred thousand workers or more
comparable to the yearly May 1 mobilization. It intends to further raise the call to genuinely end
contractualization, approve the pending House Bill No. 7787 or National Minimum Wage bill
which aims to raise to P750 the daily minimum wage, stop the illegal retrenchment, and,
regularize the contractual workers.

Duterte urges Congress to pass law ending contractualization

MANILA, Philippines – President Rodrigo Duterte urged Congress during his 3rd State
of the Nation Address (SONA) to pass a law ending contractualization "once and for all."

On Monday, July 23, Duterte reiterated that lawmakers – not Malacañang – can end
contractual employment schemes.

"Much as I would like to do the impossible, that power is not vested upon me by the
Constitution. And neither will I make both ends meet even if I violate the laws to achieve that
purpose. Simply, it is not part of my territory," the President said.

"That is why I add mine to their voices in asking Congress to pass legislation ending the
practice of contractualization once and for all," he added. (READ: Workers say Duterte policy vs
contractualization 'useless')

Duterte signed Executive Order (EO) No. 51 last Labor Day after several
postponements, in an attempt to prohibit illegal contracting and subcontracting. But workers'
groups called this move a "face-saving measure." (READ: TIMELINE: Duterte's promise to
abolish endo)

Provisions of the EO, labor groups and lawmakers pointed out, were already in the
Department of Labor and Employment (DOLE) Department Order 174 that set "stricter"
guidelines for contractualization.

"On May 1 of this year, I signed Executive Order 51, which sought to protect the
workers' right to security of tenure. Read my lips, I understand that this does not satisfy all
sectors. I share their sentiment. I truly do," Duterte said.

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 Labor Secretary Silvestre Bello III earlier said an EO would not stop contractualization,
as "penalties should be imposed" on erring establishments.

Malacañang sided with Bello, saying that an EO can only do so much.

Labor groups have since slammed the Duterte administration for "not keeping" its
promise to end contractual employment schemes.

According to the Trade Union Congress of the Philippines, there are about 25 million
contractual workers in the Philippines. Of the figure, the government has placed 316,880 workers
in permanent positions as of July this year.

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 Formulation of Economic Policy

A. GOAL

The goal for this matter is to create a new perspective of dealing with the issue
contractualization to bring equitable compensation in the part of workers under it just as
with the regular ones. As contractual workers are deemed to be unfairly compensated
compared to regulars, the need to address the issue arises. Most industries in the
Philippines are composed of workers under contractual basis who in return do not receive
certain benefits such as health benefits, insurance, bonus pays, GSIS, PAG-IBIG, etc. and
do not enjoy privileges a worker and his family may originally enjoy. Together with this,
as they only receive payment for what they have rendered, they do not get to spend for
other necessities and usually their income fall short to provide for their everyday needs.
And due to this, it leaves them no choice but to borrow money, not even from the bank
for they can’t provide enough requirements to be able to so. They borrow from either
some small money-lending company or loan shark which of course have higher interests.
By the time they get their wages, all of it or maybe not even enough to use as payment.
And they will again fall short of money for basic needs. And the cycle repeats until their
loans pile up, not growing as a worker and as an individual. As living expenses increases
due to our economic status and as these problems become causes of another problems,
workers should also be given enough income to have solutions for these problems at the
least.

B. POLICY OPTIONS

• Granting Compensatory Benefits to Contractual Workers

As contractual employees are not benefited the same with the regular workers,
their work shall be compensated fairly. Unlike regular workers, most of the contractual
workers are receiving wage lower than how much they deserve based on their work and
perseverance. There are workers who have contribution to the company greater than
what they are paid to. Working with dedication, their needs isn't always met and they're
earnings sometimes fall short to their daily needs. That is the reason behind the idea of
giving benefits to them especially to those deserving. To address the need for the
benefit of these workers, employers may increase their compensation that may be
beneficial to both parties. Compensatory benefit here is regarded as the benefit that
workers may acquire for the service they rendered which is not included in the wages or
salaries they earned. We can see this as remuneration or bonus pay in recognition to
their hard-work and contribution to the company. The rules shall cover the amount the
incentives an employee may acquire aside from their regular wage. Included also in
these rules is the corresponding right and just treatment to contractual workers.

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 • Additional Compensation based on Working Experiences

There are workers who have worked several times under contractualization.
They have been working for years but they have never been regularized. Ranking
system can be a tool for them to be recognized and acknowledged, not just they worked,
and are working temporarily, but also the opportunities of gaining skills and expertise
through years of working under different companies. And because of these, they will
have bigger contributions to company which will also enable them to have higher salary
or wage. In other words, working experience will be one of the basis for positioning and
compensating workers.

• Execution of Safety and Security Measures for Contractual Workers

Accidents in the workplace are unwanted but common happenings in the

workplace. Regular Workers have insurance or benefits for their health, e.g.,
PhilHealth, and those benefits are provided by the company they are working in.
Contractual Workers, as known to public, don't have those kind of benefits. Under this
policy, companies who offer contractual are mandated to provide health care support
for their employees when accidents happen inside the workplace. For example, a
worker happen to be involved in an accident which caused him injury and had been
brought to hospital. The company will cover the expenses and hospital bills of the
worker. It will be of big reduction to the worker's expenses especially if his work
doesn't give him enough salary to provide his needs.

C. CHOSEN POLICY

Compensation based on Working Experiences

The chosen policy for this issue is the implementation of ranking system
based on the working experiences. It is for the reason that much of contractual
workers do not achieve to get into regular position but only renew the contract or in
some instance, only get to apply for another job and be qualified for it which is also
another contractual or ENDO. This policy will be much reflective of the goal
compare to other policy. As this will not demand regularization of workers but will
give a fair treatment to them the same with regularized one. The benefits that they
cannot attain can be placed in form of compensation that is based on their working
experience. This will be an effective way to solve both the problems of employees
and employers with regards to contractualization. As employers do not want to
disseminate all essential benefit to employees, they may resort to giving them
another compensation based on their working experience.

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 Conclusion
The proponents therefore conclude that, contractualization cannot be eliminated or
abolished because it will affect the Philippine Economy.

A vast population of non-regular employees (29.9%) are those who work as contractual
(50.3%) on the year 2016 and is continuing to grow as is observed from the year 2012 to the year
2014 which growth rate is 16.3% - Philippine Statistics Authority. Over the years, the problem
about the under compensation of those who work as contractual are not yet solved and those
workers still have the burden of being under compensated even in terms of right or salary.

The paper created by its proponents and is thought to be important by spreading the
awareness of the problems faced by the employees under the contractual. By this paper, the
proponents sought to make realizations which would make the policy makers to see this problem
as something that is serious referring to the facts presented and therefore create policies with
consideration of the suggestions concluded from the view of those people having the problems
themselves. The paper also intended to educate the mass about the certain problem as well. The
proponents believe that the spread awareness would soon lead to more actions and later on the
resolution of the problem.

Recommendations
The following are the recommendation of the proponents of the study to solve the current
problem of the nation and employees about contractualization:

1. The proponents of the study suggest the establishment of additional organizational goal
for every company with contractual workers that aims to promote equity on the part of the
employee subject to contractualization.

2. The proponents of the study suggest the fairness of treatment of the employers and the
companies towards those employees that work as contractual.

3. The proponents of the study suggest a more comprehensive attention and action of the
policy makers towards the stated problem and see this as a greater problem that it is perceive by
the people and the policy makers.

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Adam Ang and Menchani Tilendo (2018). Labor rights issues intensified under two years of
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Dela Cruz, C. J., Laciste, S. M., and Santos, J. R. (2017). An Assessment Of The Impact Of
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Endo Contractualization. Retrieved from: https://en.wikipedia.org/wiki/Endo_contractualization

Miranda, H. J. (2017). A Study on the Effects of “End of Contract” Policy in the Morale and
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Rey, Aika (July 23, 2018). Duterte urges Congress to pass law ending contractualization.
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