There has been a lot of buzzing going on in regards to the news

of contractualization in the Philippines as of lately. The new term of

government, headed by President Rodrigo Duterte, has made sure it gained
the spotlight by pledging that they will be ending the practice of “endo” or end
of contract as others would like to call it.
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Contractualization actually broadly refers to the practice of Philippine firms
and companies to outsource the process of hiring their staff and employees to
other organizations or agencies. It is by no means synonymous to endo,
which is being implemented by employers in order to get rid of their workers
before their regularization to avoid paying for benefits and bonuses;
unfortunately though many cannot disassociate the two terms from one
another.
There are pros and cons that should be considered when it comes to keeping
the practice of contractualization in the Philippines. They include the following:
Pros

Growth in Economy
Contractualization has been devised by previous lawmakers in order to
address and tackle the issue of poor economic growth in the country. Many
individuals like Cid Tereso from the Economics Program at the University of
Asia and the Pacific have argued that the time is right to end this practice
because of the improving status of the Philippine economics but there are also
others who have debated that it is simply not enough to sustain the country in
the long term.

Creating job opportunities albeit temporarily will help cater into the growth of
economics here in the Philippines even more.
Staffing Flexibility for Companies
Today, big and small corporations are being asked to supply several
requirements which include flexible working arrangements for their
employees. Providing temporary work is probably the best step they could
take in order to offer the required flexibility while meeting their own needs as
well.

According to Denise Ridenour from Kelly Services, employing both a mix of

permanent and temporary workers will result into a more efficient and effective
workplace. She adds that this practice also leads to a flexible job market
that presents greater prospects for both companies and workers.

Cons
Issues with Training
It does not matter whether the temporary worker you are hiring has previous
experiences with a similar company to yours. You will still end up training
them so that they can perform their assigned tasks and responsibilities to best
fit the specific needs of your company where they are currently being
employed.

There are times when you will have to exert more training periods to some of
your temporary employees which will waste so much time and effort, coming
from the perspective of the company. You are lucky if you manage to employ
someone who is verse enough with your particular industry that they will not
need so much training.
Issues with Benefits
Big corporations and companies in the Philippines have come under fire
because of maintaining the practice of contractualization and endo. Many
organizations working for the welfare of workers and employees being
subjected to them have made their thoughts known and protested about the
lack of benefits and bonuses workers are receiving because they are not
being regularized.

Some of the benefits that they are not receiving include: PhilHealth, SSS,
Pag-IBIG, Home Development and Mutual fund along with many others.

The debate on whether contractualization should be removed altogether in the

Philippines is still being discussed and continued not only in the Senate but
also in multimedia platforms everywhere. How about you; have you decided
which stance to take on this very important issue?
 Endo refers to a short-term employment practice in the Philippines. It is a form
of contractualization which involves companies giving workers temporary employment that last them
less than six months and then terminating their employment just short of being regularized in order
to skirt on the fees which come with regularization. Some examples of such benefits contractual
workers don't get as compared to regularized workers are the benefits of having an employer and
employee SSS, Philhealth, and the Pag-ibig housing fund contribution, unpaid leaves, and the 13th
Month Pay, among others.
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.

Contents

 1Overview
 2Types of employment in the Philippines
o 2.1Regular employment
o 2.2Probationary employment
 3Labor-only contracting
 4Philippine Administrations
o 4.1Ferdinand Marcos (1965-1986)
o 4.2Corazon Aquino (1986-1992)
o 4.3Fidel V. Ramos (1992-1998)
o 4.4Joseph Ejercito Estrada (1998-2001)
o 4.5Gloria Macapagal Arroyo (2001-2010)
o 4.6Benigno Aquino III (2010-2016)
o 4.7Rodrigo Roa Duterte (2016-Present)
 5Policies
 6Movements and Notable Cases
o 6.1Movements
 6.1.1Magnolia
 6.1.2PLDT
o 6.2Notable Cases
 7References

Overview[edit]
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 month 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.[1]

Types of employment in the Philippines[edit]

Regular employment[edit]
A regular employee is defined by the 1974 Labor Code as one who is “engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer,”[2]
There are two types of regular employees as per the Labor Code of the Philippines: (1) those who
are engaged to perform activities which are necessary or desirable in the usual business or trade of
the employer; and (2) those casual employees who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are employed.
A regular employee is entitled to the following (but not limited to) benefits:

 Social Security System (SSS)

o Private companies are required to register all regular employees in the system (RA 8282).
The SSS provides retirement and health insurances.
 Philippine Health Insurance Corporation (PhilHealth or PHIC)
o Both private and public sector workers ought to be contributors to this service (RA 7875).
The corporation sets aside contributions for medical insurance.
 Home Development Mutual Fund (HDMF or Pag-IBIG)
o This agency allows provides housing loans with low interest, payable up to 30
years.[3] Private and public firms are also mandated to contribute to the fund on behalf of all
its regular employees (RA 7835).
 13th month pay, service leaves, medicare and maternity benefits, etc., union dues (if any)
The above-mentioned pecuniary benefits are deducted by the employer from the gross monthly
salary of the employee.

Probationary employment[edit]
In addition to regular employment, probationary employment is also possible through the Code.
Under Article 281, probationary employment shall not exceed six months “unless it is covered by an
apprenticeship agreement stipulating a longer period.”[4] This would mean that any employee working
over the stated or agreed period shall be considered as a regular employee.
However, both regular and non-regular employees still enjoy security of tenure, pertaining to the
Constitutional guaranty found in Sec. 3, Art. XIII of the 1987 Constitution that no employee, whether
regular or non-regular shall be terminated without just causes authorized by the law under Art. 282
and Art. 283 of the Labor Code. Probationary employees in this case are not entitled to grants
enumerated in preceding paragraphs.

Labor-only contracting[edit]
Department Order No. 3 (series of 2001) explicitly prohibits labor-only contracting, defined to be a
type of employment wherein:
“the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal, and the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work or service under its own account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor or subcontractor is performing
activities, which are directly related to the main business of the principal.”
Contracts or subcontracts whose existence precede the effectivity of the Order are given non-
impairment and non-diminution of benefits."[5]

Philippine Administrations[edit]
Ferdinand Marcos (1965-1986)[edit]
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 employee is unable to show that he/she possesses
the necessary skills to keep the job, he/she may be terminated from employment." [6]
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.

Corazon Aquino (1986-1992)[edit]

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.

Fidel V. Ramos (1992-1998)[edit]

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 in 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 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.

Joseph Ejercito Estrada (1998-2001)[edit]

With 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.

Gloria Macapagal Arroyo (2001-2010)[edit]

The DOLE Department Order 3, though it did revoke the previous DOLE Department Order 10, was
only a temporary solution.

Benigno Aquino III (2010-2016)[edit]

Upon the transition of power from the 10 year Gloria Macapagal Arroyo administration the Benigno
Aquino III administration started. DOLE Department Order 18 went under review and resulted in a
new and improved version of itself with the DOLE Department Order 18-A's release. By this point
DOLE has aggressively restricted and regulated the agency contractualization practice that it
seemed that the norm is not contractualization whilst regularization being the exemption.

Rodrigo Roa Duterte (2016-Present)[edit]

During his campaign for the 2016 Presidential Election, one of Rodrigo Duterte's 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.[7]

Policies[edit]
According to certain laws under the Philippine employment protection laws employers must offer
permanent employment after six months of engagement; otherwise, or otherwise lay them off. (LCP
Articles 279, 280, 281, 286 and 287). This is commonly referred to as the regularization law. In
addition, in case the company is unable to regularize them, they may hire temporary workers via
principals or service contractors.[8]

Movements and Notable Cases[edit]

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 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.

Movements[edit]
Magnolia[edit]
In a statement released in response to their inclusion in the list, the company stated the affected
workers are not the company's employees but are employed by an unnamed service provider:
“We believe that our inclusion in the list stems not from our contracting of labor but from the use of
certain machinery and equipment leased by a DoLE-accredited independent service provider whose
workers maintain and operate them. They, not our workers and employees, are the subject of
concern of the Department of Labor and Employment (DoLE).”
In the same statement, the company also noted that they have always worked to protect their
employees’ rights and are coordinating with DOLE: “We at Magnolia Inc. have always worked to
protect the rights of our employees and workers … We acknowledge this issue and continue to
coordinate with the DoLE to immediately address the matter. Nevertheless, as a company, we
believe that all our partners should exercise the same care that we do when it comes to ensuring
that workers’ rights–including security of tenure and all benefits provided for in the Labor Code and
prevailing laws–are fully protected. As such, we are committed to working with our providers to
ensure this issue is resolved at the soonest time possible.”
PLDT[edit]
In 2017, DOLE ordered PLDT to regularize almost 9000 employees. This order came about after
DOLE found out that numerous of PLDT’s contractual agencies were violating the labor laws of the
Philippines.[9] Several agencies denied their workers the rights stated in the Labor Code of the
Philippines such as the 13 month pay. PLDT appealed to the Labor Department to reconsider this
decision, but this was rejected in January 2018, as Labor Secretary Silvestre Bello III said that, “his
office found no merit to overturn the order.” Some contracting agencies however were found to be
legal and the number of employees that were required to be regularized dropped from almost 9000
to about 8000 employees. DOLE also required PLDT to pay about Php 66 million in unpaid
benefits.[10]
As of June 2, 2018, PLDT began the process to regularize their employees.[11] They continued to
appeal to DOLE about their decision to shut down all the contracting agencies because this, “would
effectively shut down these companies and displace not only the workers deployed to PLDT but also
thousands of other workers assigned to other principals.” [12]