President Duterte failed to do the impossible: end contractualization and ‘endo’

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Oscar P. Lagman

To Take A Stand

President Duterte failed to do the impossible: end contractualization and ‘endo’

As this is being written (hours before the State of the Nation Address), a massive protest rally is being mounted to denounce President Rodrigo Duterte for failing to fulfill his campaign promise to put an end to contractualization and “endo.”

“The moment I assume the presidency, contractualization will stop,” promised presidential candidate Rodrigo Duterte in 2015. When President Duterte had not put an end to contractualization after six months in office, Budget Secretary Benjamin Diokno said: The candidate Duterte is different from President Duterte. You make campaign promises but when you see the data you realize it’s impossible to fulfill.” Any voter can say that of any candidate for president.

In fact, all five presidential candidates in the 2016 general elections promised to put an end to contractualization if elected. Yet none of them, not candidate Duterte, had a good grasp of the crux of contractualization and its ramifications as none of them had substantive experience in running a business that employs a large number of workers. Nay, none of them had run a business. Except for Grace Poe, they spent much of their adult life in government service.

President Duterte did try to end contractualization upon his assumption of the presidency. He warned employers: “Stop contractualization. It will not do good to our country. Don’t wait for me to catch you because I will be unforgiving. If I find you out, I’ll just simply close your plant. I can always find a thousand reasons to do it, believe me.”

Contractualization continues to this day, first because the Department of Labor and Employment allows it. Contractualization is generally understood in the business sector as the arrangement by which a principal (owner or chief executive officer of an enterprise) farms out to a contractor the performance or completion of a specific job within a specified period. This is the arrangement preferred by industrialists whose business operations peak and ebb depending on the season.

There are also projects such as those in construction that require companies to hire workers only for a specific period, like two years, the estimated length of time to complete the project. Construction would slow down to a snail’s pace as construction companies would build with regularized workers only. The over-hyped “Build, Build, Build” program of the Duterte administration would practically grind to a halt.

In fact, the government is one of the biggest buyers of outsourced labor in the country. Civil Service Commission (CSC) data show that last year, more than 27% of the 2.4 million government workers or almost 700,000 were “job order” or “contract of service” employees. Of the almost 120,000 new hires last year, 65,200 were taken as contractual workers.

The CSC allows the hiring of people on the basis of job orders if the jobs are of short duration such as the hiring of secretarial staff when the country hosts an international conference or for a specific piece of work like the collection of garbage after a big event such as the celebration of Independence Day.

Secondly, stopping contractualization will not do the economy any good. It would stunt the growth of small and medium entrepreneurial ventures which hire workers on short-time basis.

Export companies whose demand for their products are seasonal, such as Christmas décor, would lose their buyers if they cannot produce the volume ordered on time, due to a small work force.

There is much confusion on what “endo” is. Businessmen differentiate “endo” or end of employment contract from contractualization. “Endo” is the practice of hiring personnel on a temporary basis, usually for five months only, to avoid making them regular employees.

Under the Labor Code, an employee who remains employed after the probationary period of six months automatically becomes a regular employee entitled to the usual fringe benefits.

A regular employee is also commonly referred to as a permanent employee because that is virtually what he becomes — a permanent feature in the workplace. “Endo” is the work arrangement favored by many small-scale entrepreneurs, not because it avoids giving fringe benefits, as politicians and labor leaders mistakenly think, but because it makes it easy for the employer to terminate an employee performing badly.

Philippine labor laws are extremely protective of the employee. In fact, the Labor Code says that any question on the meaning of labor laws shall be resolved in favor of the employee. According to our labor laws an employee may be terminated, dismissed, or fired for just cause. Just causes include serious misconduct, habitual neglect of duties, breach of trust, and commission of a crime.

The words “serious” and “habitual” are relative adjectives while the words “misconduct,” “neglect,” and “trust” are abstract nouns. They are all subject to various interpretations. DoLE arbiters and officials will invariably interpret those words favorable to the employee.

In the service industry, prompt, courteous, and correct service is of utmost importance. In the fiercely competitive fastfood business it could be the competitive edge. Rudeness to customers or serious misconduct, indolence, or habitual neglect of duties, and sloppy handling of food are intolerable in the restaurant business. Errant personnel must be replaced right away to protect the reputation of the place. But it is virtually impossible to terminate a regular employee. That was my frustration when I was in the business of ice cream parlors (Coney Island Ice Cream).

On Labor Day, the President signed Executive Order No 51 supposedly ending “endo.” What the executive order really did was merely make direct hiring the norm in employment. The companies who farmed out to service contractors or labor providers the performance of certain jobs merely terminated their contracts with the service or labor providers. The result was the mass layoff of as many as 200,000 workers.

“Endo” is not entirely eliminated as direct employers can still dismiss directly hired personnel before their completion of six months of employment or before they are regularized in accordance with labor law.

The President has given up on ending contractualization and “endo.” He has “farmed out” that complex job to Congress. He had coming to him the anger of organized labor for promising, in the words of Secretary Diokno, to do the impossible.


Oscar P. Lagman, Jr. is a member of Manindigan! a cause-oriented group of businessmen, professionals, and academics.