Contractualization is a globally acceptable labor trend says PALSCON

by - May 06, 2016

As an Economics graduate it is my belief that the labor force is the primary social and economic force that all countries need for national development.We need workers for the economy to run well but what happens when some politicians who boasts that they have the workers’ rights in their mind is misled about some labor practices in our country? Take for example the practice of contractualization and casualization employed by many companies in our country. End of contract or “endo” has taken a bad rap from workers who felt that they have no security of tenure in their work. But is contractualization a bad labor practice?

The Philippine Association of Legitimate Service Contractors, Inc. (PALSCON) emphasized that contractualization is a generally acceptable labor practice and is a worldwide trend during the recent GMM by ECOP and PALSCON on  “Understanding The Real Issues on Contractualization and Casualization”

PALSCON’s new president, Rhoda Caliwara, pointed out that in the Philippines alone, contractual work employed around 600,000 workers in 2014, citing data from the Philippine Statistics Authority. In 2015, the total went up to 850,000 workers and if seasonality, probationary, casual and apprenticeship employment are to be included this year, the number of workers that will benefit from contractualization is projected to hit more than 1 million workers.

PALSCON’s new president, Rhoda Caliwara

PALSCON’s immediate past president, Butch Guerrero, said that according to studies done by the Boston Consulting Group,“Contractualization or Service Contracting has helped 61 million workers gain access to the labor market worldwide through the employment and recruitment activities of such companies.” The study was commissioned by the International Confederation of Private Employment Services (CIETT), of which PALSCON is an active member. 

Service contracting, according to Caliwara, is seen to provide decent jobs to a large part of the Filipino workforce in 2016. It is also a worldwide trend that lets businesses adapt to the cyclical and also downward and upward trends in the market today. “These trends are increasing due to the fast-paced business trends being influenced by mobility through technology. Removing or banning contractualization would mean taking away productive jobs from one million Filipinos and would set the economy back,”Caliwara explained.

Banning contractualization would also increase unemployment rate to unimaginable levels that is likewise counterproductive to the economy. “Removing contractualization would put the Philippines at a disadvantage vis-à-vis its ASEAN neighbors in this age of globalization and would mean capital flight of the country to neighbors such as Thailand and Vietnam,” retorts Guerrero.

Contrary to common perception that contractualization deprives workers of government-mandated benefits, Caliwara reiterates that PALSCON and its members do not abuse Filipino workers’ rights. “Our members extend benefits such as SSS, PhilHealth, PAG-Ibig and the mandated 13th month pay. We also follow the required minimum wage set by the National Wages and Productivity Council of the Department of Labor and Employment and our workers also get necessary leaves and rest days as mandated by the Philippine Labor Code.”

PALSCON, Caliwara said, also works hand-in-hand with the Department of Labor and Employment (DOLE) and other concerned groups to help protect the Philippine workforce. In 2011, the DOLE issued Department Order 18-A in 2011 which outlawed the so-called “5-5-5 system” where workers are forced to sign short, 5-month employment contracts and thus are not qualified to receive the benefits due them. “Our workers are also at co-terminus with our contract with our principals in order to give them longer employability under the contractual agreement,” Caliwara adds. 

The association also set higher standards in terms of capitalization, registration fees, and safety standards to its members and workers. With the issuance of DO 18-A and as a result of the higher standards, it helped decrease the number of registered service contractors from 22,000 in 2010 down to almost 5,000 in 2015. PALSCON, Guerrero said, is helping weed out fly-by-night contractors who do not have regular offices, are unregistered and do not remit the proper government-mandated dues to its workers.

“We assure the public and others who are skeptical at the issue of contractualization that PALSCON will not tolerate such companies who abuse the Filipino workforce. This stand is at one with other trade unions in the country and is non-negotiable,” declares Caliwara.

Tin Gonzaga's photo

One of the speakers during that day Atty. Josephus B. Jimenez, FPM, AVA shared these compelling reasons why legitimate contracting should not be abolished. 

For more about PALSCON, visit

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