CONTRACTUALIZATION

I. INTRODUCTION
The term Contractualization is a term of current notoriety, emblazoned
on the headlines of various newspapers and shouted with derision at political
sorties, to arouse the anger of the general public. The origin of this term can be
traced to trade union leaders who seek to demonize all forms of outsourcing or
contracting out of work by employers to independent job contractors, and, by
extension, any short term or temporary employment. Over the years, these trade
union leaders have ingeniously and unfairly linked contractualization to the
catchphrase security of tenure and succeeded in depicting employers and
service providers as mercenaries sacrificing their employees to the altar of profit,
in violation of labor laws. This vilifying propaganda campaign has transformed a
purely socio-economic issue into a political one. A closer look at the
underpinnings of this term is necessary, to relieve undue anxiety and uneasiness
in the business community, if not soothe ruffled political feathers.
Under the law, all employees are entitled to security of tenure, which
simply means that they cannot be dismissed without just or authorized cause,
and after strict observance of procedural due process. That constitutional
guaranty applies to contractual, temporary, and seasonal or project employees
whose tenurial right is protected under the terms of their contract of employment.
During the effectivity of their contracts, these employees can be assured that
their employment will not be terminated without just or authorized caused and
that they will be afforded the benefits of procedural due process. Under Art. 295
of the Labor Code, such employees hired for a particular position on a casual,
seasonal, or project basis automatically becomes regular employees after one
(1) year of service in the same position. Such is the essence of the phrase
security of tenure. It does not guarantee permanent or lifetime employment, a
practice once adopted in Japan in the 60s, but which it eventually scrapped for
various reasons. Contractualization, or in proper language, outsourcing, is an
employment strategy is explicitly recognized by Art. 106 of the Labor Code and
established jurisprudence as a valid exercise of management prerogative and
business judgment. That prerogative is founded on the constitutional rights of
employers i.e., the right and freedom to contract and the right to property.
Jurisprudence abounds where an employer is allowed to use its best business
judgment to determine whether a portion of its operations can be outsourced.
This discretion is upheld for as long as the employer is motivated by good faith,
i.e. to ensure the financial viability of the company and preserve livelihood. The
lines are drawn where circumvention the law or malicious or arbitrary action
begins. It is subject to the states exercise of its paramount police power but it
may not, under the guise of protecting the public interest, arbitrarily interfere with
private business, or impose unusual and unnecessary restrictions upon lawful
occupations. Hence, it is clear that due process, while protecting the employees,
recognizes that the employer must also be protected from the oppressive use of
state power.
 Endo, not unlike the term contractualization, elicits the same, if not more,
contempt. Yet outsourcing or contractualization should not be equated or
confused with endo, for the latter practice deserves the scorn heaped upon it.
Endo is unconditionally prohibited while contractualization is conditionally
allowed. In fact, contractualization owes its tainted reputation to endo and other
similar labor only contracting arrangements. What is needed, to maintain the
balance between management and employee interests is not the termination or
abrogation of contractualization but the stricter enforcement of the provisions of
DO18-A prohibiting Endo and other forms of labor only contracting
arrangements?
Philippine labor costs have become relatively high. Thus, Philippine labor
has become less competitive compared to some developing countries in the
ASEAN region.
However, such high cost is not commensurate with the fact that there is an
enormous supply of labor seeking jobs at low wages. Poverty and lack of skills of
many such workers also implies that their productivity often cannot match the
high cost of mandated minimum wages. Factor in the various forms of benefits
that employers are required for regular employees, then the gap in wage and
productivity got even wider.
A termination of endo(contractualization) will raise the cost of labor per
unit since many of those affected are likely to be non-regular employees.
Definitely, a fall in employment arising from the termination of endo will
come about. Some companies will reduce their operations due to higher costs.
Also, some workers will no longer be hired. The negative impact will be severe
for those losing their jobs.
Lets promote more domestic investments, more foreign direct
investments and more infrastructure investments in the country. With these
activities, more jobs will be created and eventually, we eradicate unemployment
and underemployment.

II. STATEMENT OF THE PROBLEM

This case study attempts to determine the negative effects of
contractualization in the Philippine economy.
1. How to prevent termination of contractualization from increasing the
unemployment rate.
2. How to prevent termination of contractualization form affecting the
operations of businesses that will lead from workers to lose their jobs.
3. How to use contractualization in decreasing the unemployment in the
Philippines.

III. OBJECTIVES

A. Must or short-ranged objectives

1. How to prevent termination of contractualization from increasing the
unemployment rate.
 2. How to prevent termination of contractualization form affecting the
operations of businesses that will lead from workers to lose their jobs.
3. How to use contractualization in decreasing the unemployment in the
Philippines.

IV. ALTERNATIVE COURSES OF ACTION

Area of consideration:

1. Employees. In choosing the alternative course of action, the first thing to

consider is the employees, and their rights as they are one of the affected
to contractualization.

2. Employers/Business Firms. Another is of course, the employers and

business firms as they are the provider of different jobs that helps to
decrease the unemployment rate in the Philippines.

3. Economy. We also need to consider the Philippine economy because of

its connection to the employees and business firms. The lower our
economy the lower profits for the businesses and lower wages/salary for
the employees.

After keen analysis of the researchers, the following alternative courses

arise:

1. Free Livelihood Training and Seminars.

The Local Government Units (LGU) will conduct a free seminars and
trainings in order to find some unemployed Filipinos something
profitable so that they dont need to apply jobs especially those
undergraduates.
Advantage(s): It will help the unemployed to be self-employed instead
of applying for jobs.
Disadvantage(s): It will be quite expensive in the government funds
and has no assurance if all those who attend trainings has the
capability to make capital for business.

2. Easy Loan for Small Business.

Easy loan for small business in order to provide them more capital will
help the smalls business to compete with the big business firms in the
Philippines. The more and bigger business the lesser unemployment
rate.
Advantage(s): It will help small businesses for expansion that will
surely provide job vacancies.
Disadvantage(s): It will be quite expensive to the government since
there will be no assurance that the borrower will be pay their debts.
 3. Encourage Foreign Investments and Private Investments to the
Philippines.
The government will find more investments from the foreign countries.
If that so, the demand for the labor will high and will help to decrease
the increasing rate of unemployed Filipinos in the Philippines.
Advantage(s): It will help to provide more business in the country that
will also provide more jobs for the Filipino people.
Disadvantage(s): It will also be expensive for the government
because of the travel expenses in encouraging foreign investments.

V. EVALUATING ALTERNATIVE COURSES OF ACTION

In evaluating alternative courses of action the following criteria has been

established:
Criteria Description Percentage
Efficiency The competence of the
proposed alternative
solution measures the 50%
extent to which a solution
maximizes the net benefits
of all of the affected
population.
Time Allotment Alternative course of action
must be able to solve the 25%
problem as soon as
possible.
Financial Capability Alternative course of action
must be able to fit on the 25%
budget of the organization.
TOTAL --- 100%

Evaluating alternative courses of action:

Alternative Time Financial

Efficiency
Courses of Allotment Capability TOTAL
(50%)
Action (25%) (25%)
1. Free
Livelihood
Training and 45% 22% 19% 86%
Seminars.

2. Easy Loan for 43% 23% 22% 88%

Small Business.

3.Encourage
Foreign
Investments
and Private 47% 24% 19 90%
Investments to
the Philippines.

VI. RECOMMENDATION
From the above cited alternative courses of action, it is extremely suggested
to Encourage Foreign Investments and Private Investments to the Philippines
because it will provide more jobs. In our further analysis, we believe that
contractualization is really not the problem itself because contractualization is
a way to determine if a person has the capability to do a job well considering
the business firm also it is a way to provide job for unemployed as employees
need to be replaced after their contract. So we believe that the government
shall provide more investments in order to provide job vacancies for
unemployed Filipinos that will decrease the umemployment rate.

VII. IMPLEMENTATION
The government, either through the Philippine President Rodrigo Duterte or
the Department of Labor and Employment (DOLE) Secretary will travel to
different countries to encourage foreign investors to put up business in our
beloved country that will provide job vacancies so that we dont need to
terminate the contractualization that will cause to the business increase the
cost of their operation that either will decrease their employees or decrease
salaries of their employees. If there are more investors, demand for labor will
increase and will decrease the increasing rate of unemployed Filipinos.