What You Need To Know About Contractualization And End Of Contract

3 min. read By eCompareMo on

The labor code, ‘555,’ banking applications, and other pertinent details surrounding the issue.

While the results of the recently held elections have already been made apparent, the issues tackled during the campaign season still linger on, especially for those who hold on to the promise that change is coming.

During the fiery campaign period, one of the biggest topics that got a lot of attention was the issue of contractualization of labor.

With 35 million contractual workers in the Philippines, the issue is just hard to ignore. What is contractualization and how does it affect everyone of us?

Endless cycle

Contractualization has been a system long practiced by a lot of companies in the country, especially large companies who want to keep their profits up.

In the Philippine context, contractualization “is a work arrangement whereby workers are only hired for only about five months without security of tenure, monetary, non-monetary, and social protection benefits.”

The amendment of the Philippine Labor Code, which is more commonly known as the Herrera Law, gave big companies a leeway practice contractualization widely, thereby allowing them to cut costs and generate more revenue.

Aside from this, people also refer to this employment practice as “endo” (end of contract), or “555,” which refers to a system where employers hire and fire probationary employees to avoid making them regular employees.

By terminating them before they even reach their sixth month, which is the maximum length stipulated by the Labor Code of Philippines, they can avoid regularizing employees and deprive them of benefits that come with being a regular employee, such as paid leaves, bonuses, overtime, membership contributions, health insurance coverage, and other benefits.

The amendment of the Philippine Labor Code, which is more commonly known as the Herrera Law, gave big companies a leeway practice contractualization widely, thereby allowing them to cut costs and generate more revenue.

Read: (These Are The Lowest-Paying Jobs In The Philippines, According To DOLE)

Labor groups have long been crying foul over the continuous prevalence of such practice in the labor sector that presidential candidates in the 2016 elections expressed to do something about it. Each candidate had their own promise in dealing with endo, but in the end, it was Davao City Mayor and presumptive President Rodrigo Duterte’s message that resonated with the public.

Running away

Why do labor groups want to end the practice of contractualization? To begin with, the abolishment of such system will give workers job security and allow them to continue doing their jobs without worrying whether or not there will be employment waiting for them after their contract ends.

Aside from job security, here are the basic benefits are given to regular employees:

1. Social Security Systems (SSS) contributions

2. National Health Insurance Program (Philhealth) contributions

3. Home Development and Mutual Fund (HDMF) contributions

4. 13th-month pay

5. Service incentive leave

6. Meal and rest periods

In addition, regular workers can also receive the following perks outside the mandated benefits, provided that they company issues them to their employees:

1. Housing and housing plans

2. Expense account

3. Company-sponsored vehicle

4. Paid holiday and vacation

5. Educational assistance or plans to employee and/or his direct dependents

Being a regular employee also makes you a better candidate for banking products. According to eCompareMo’s resident banking expert Darlyn Natividad, contractual employees have a slim chance of getting their applications for credit cards, loans, and other banking products approved. “This is because their contract gives them limited time in the company, and there is no assurance that they can keep up with repayment schemes.”

Next month, the new President will finally take over and lead the country for another six years. While the apparent winner of the elections promised to put an end to contractualization, only time will tell if he will deliver his promise to millions of Filipinos who still have go through such setup to make ends meet. –Dino Mari Testa

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