We’d like to hire more contractual workers to help us in our business operations. But we’re still weighing some things given the government’s crackdown against “endo” employment. Please help us make an intelligent decision. — Doubting Thomas.
A 26-year-old alumnus met his old economics professor when he was visiting the university. They talked about the good old times, including the professor’s written examinations. When shown some test papers, the alumnus exclaimed: “Professor, I remember those are the same questions you asked when I was in your class, six years ago!”
“Yes, I’m happy that you can still remember them,” replied the professor, “I ask the same questions every year.” The alumnus said: “But surely, you know that your students would normally pass those questions from one year to the next.”
The grinning professor said: “Of course! But in economics, we always change the answers. And that’s where the ultimate challenge lies for them.”
It’s the same thing happening for managers looking at “endo” workers as the ultimate strategy. They don’t bother to “change the answers.” Why not? Because it boils down to economics. It’s easier, cheaper, and faster to hire contractual workers.
It’s easier because manpower service providers will always be racing to provide you with their “best” (or recycled) job candidates plucked from somewhere. You don’t have to undergo the administrative nightmare of advertising a vacancy, sourcing candidates, processing applicants, and onboarding them.
It’s cheaper, because you don’t have to pay contractual workers above-average pay and perks available to the regular work force. Also, “endo” workers are not eligible to join trade unions, which can make things difficult for management.
It’s faster, because if something goes wrong – either due to poor performance or discipline issues, you can readily ask the manpower agency to replace them almost instantly. Whatever labor issues crop up, the principal employer is “normally” shielded by the agency, except that they may face indictment as part of the legal process.
When choosing between hiring a contractual and a regular worker, management almost without thinking may end up choosing the former. But now that the government is serious in cracking down against the hiring of contractual workers, management should think of “new answers.”
Suppose you’re planning to buy a new car. You need a minivan to support your lifestyle as a family man. You read many things about Toyota Innova and know all about its advantages for a three-child household. Then you see an ad for a high-end Korean luxury car on social media, and it comes with an offer of free oil changes, including free maintenance checks, and a lot more for five years.
How could you refuse such an offer? In this case, the “free maintenance” sweetener may sway your decision to buy that Korean car.
So, you buy the Korean car — and the “free maintenance offer.” In its third year, it breaks down for no apparent reason and a critical component worth at least P100,000 must be replaced. Even if you agree to pay for it, you need to wait for two months for the part to arrive.
If you’re driving an average of 10,000 kilometers a year and the oil needs to be changed every 10,000 kilometers, the oil change and other maintenance costs are only be P7,000 per change, or P21,000 over three years. How much is that amount compared to the price tag of the Korean car?
You’ll find out it’s almost nothing, and yet that was the main reason why you bought the car in the first place. By all accounts, it’s not a good reason for you to buy that car.
What I’m saying is this — would it be economical in the long-term to hire and maintain contractual workers? The answer depends on many factors. Let’s explore them one by one:
One, the average size the work force. This is best answered by calculating the percentage of “endo” workers compared to the regulars. If your temps are scandalously bigger in numbers than regulars, then wait until you hear from labor inspectors, if not the trade unions, given the current direction of the government. Is it worth it?
Two, the quality of the work force. How many are college graduates compared to those with high school education? If your business is labor-intensive, this question may be irrelevant, but not necessarily when we talk about employee empowerment and engagement, which is best suited to graduates who are serious about industrial democracy.
Three, the nature of the company’s business. The key phrase is “necessary and desirable” in the conduct of one’s business. This means that a brick-and mortar grocery store cannot outsource the task of a cashier because such job is “necessary and desirable.” Unless one is operating an online store, then you can’t simply hire contractual cashiers.
Last, the sophistication of human resources strategy. You’ll be surprised to hear that some organizations have no manpower planning, performance appraisal systems, employee career development, succession planning, among others. And their HR managers don’t have the experience to do such important job, but to coordinate only with manpower service providers.
This list is not complete. But what I’m telling you is that our previous model of hiring “endo” workers must be carefully examined. Looking at the matter objectively, I can understand the problems of management, but not when they deliberately violate the law, as I experienced firsthand during the 1970s, when I was one of the first “endo” hires as a working student.
ELBONOMICS: A corporate vision manned by contractual workers is immaterial.
Connect with Rey Elbo at reyelbo.consulting