The manufacturing industry will spend an additional P49 billion annually on labor cost if firms were to absorb the over 300,000 contractual workers as a consequence of President Duterte signing the security of tenure (SOT) bill.

In a computation done by businessmen obtained by the BusinessMirror, the employers projected an additional labor cost of P48.83 billion yearly for manufacturing should it absorb all of its agency-hired workers. This is estimated to climb to as much as P52.53 billion when the 13th month pay is accounted for, and has yet to cover incentive leave, overtime pay, night differential and holiday and weekend pay.

Using Metro Manila as a basis since the capital hosts over one third of manufacturing firms in the Philippines, employers will need to shell out P11,814 on salary and P1,242.44 on share for contributions on social security, health, housing and contingencies per worker monthly.

Based on records from the Philippine Statistics Authority (PSA), there are 311,722 contractual workers in the manufacturing industry as of 2016. If firms were to absorb all of them, this will amount to P4.06 billion in additional monthly labor cost covering salaries and contributions for social protection.

Computation with Palace

A highly placed source said the Office of the President (OP) last Friday requested the business sector to provide its assessment of the SOT bill, particularly on its impact on investments and employment in the Philippines.

The computation was transmitted to the OP, the source said, and was reviewed by President Duterte before he delivered his State of the Nation Address (Sona) on Monday. The President was expected to approve the SOT bill on Sona day, but he did not do so.

Duterte made no mention of the measure in his 93-minute address, and disclosed in an interview with reporters afterward that he is undecided on whether to sign or veto it, or even allow it to lapse into law on July 27 – that’s 30 days after its transmission to his desk.

The source claimed the President will most likely veto the SOT bill after getting advice that it could work against the government’s investment promotion and job generation efforts. In spite of the information, employers are holding their breath, as Duterte can still approve the measure depending on his cost-benefit analysis.

Veto possible

“Word inside the Palace is he will veto it. This was apparently the reason he made no mention about the measure in his Sona speech. However, he could change his mind anytime and may still approve the SOT bill at the end of the day if he believes this is the best for the country,” the source said over the phone.

The computation submitted to the OP also reported over 230,000 assembly line contractual workers are at risk of losing their jobs if the SOT bill is signed into law. Under the measure, it is prohibited to contract out activities that are directly related to the principal business of the contractee.

Directly-related jobs shall be determined by industry tripartite councils, or by the labor chief in the absence of an appropriate industry council.

According to PSA figures, there are 236,697 agency-hired workers tasked to do assembly line jobs in the Philippines as of 2016. If assembly line work is concluded as a directly related job to manufacturing, then these contractual workers “will potentially lose their jobs since these are contracted out, and not all workers could be absorbed and regularized by the contractee.”

Careful study

LABOR and Employment Secretary Silvestre H. Bello on Monday said the SOT bill is still going through “careful” study by Malacañang amid objections from both management and labor groups.

“Aside from businessmen, there were also labor groups, which are against it. That is why he (President Rodrigo R. Duterte) is wondering, why the workers, who are supposed to benefit from it, are also objecting,” Bello said in an interview.

He said Duterte is still considering the impact of the new new legislation, which is expected to further regulate the practice of contractualization.

Labor coalition Nagkaisa earlier described the Senate bill as watered-down, since it did not include the provisions of the House of Representatives version.

Bello belied this, saying the bill’s stringent provisions, which includes the licensing of agencies as well as creating a list of positions that could be contracted out, account for the objections  of some employers.

The labor chief, however, is optimistic that Duterte will support the balanced bill especially since it was also endorsed by both Department of Labor and Employment (DOLE) and Department of Trade and Industry (DTI).

“I have read the bill. It might not be a perfect bill, but it definitely achieves the purpose of the bill and that is to provide security of tenure to our workers. Not only jobs but decent jobs,” Bello said.

In an interview after his fourth State of the Nation Address (SONA) on Monday, Duterte said he chose not to include it in speech since he still considering its “pros and cons.”

‘Future jobs at risk’

Commitments secured by the government from Japan in March are also imperiled by the potential signing of the SOT bill.

Japanese firms, mostly engaged in manufacturing, pledged to invest a total of $1.24 in new projects and expansions to the Philippines. The commitments, secured by the Department of Trade and Industry (DTI) in a business mission to Tokyo, will generate at least 16,000 jobs.

“Future employment, such as the Japanese pledges of 16,000 [jobs] from new investments, will be compromised since some of them are in the manufacturing industry,” the business sector said in its analysis of risks brought about by the SOT bill.

Further, yearly investments of members of the Joint Foreign Chambers in the Philippines (JFC), amounting to between $5 billion and $50 billion, may be downgraded as employment and economic activities are reduced. The JFC is a strong critic of the SOT bill, and has repeatedly appealed to the Chief Executive to veto the measure.

In a letter dated July 1, the JFC, along with local business groups, pleaded with the President to veto the SOT bill, saying the bill’s objective of banning the end-of-contract scheme, popularly known as endo, was supposedly already achieved under Executive Order (EO) 51 and Department Order (DO) 174 of the Department of Labor and Employment.

“Both DOLE’s DO 174, which took effect in early 2017, and EO 51, which took effect in mid-2018, already [prohibited] endo. If endo is dead, therefore, the SOT bill is superfluous,” the letter read.

Endo is the practice of hiring and terminating workers after every five months to circumvent the law’s requirement of regularizing them on the sixth month of their employment.

Business groups also argued that passing the SOT bill could work against the Philippines at a time the world of work is changing. Under the future of labor, there will apparently be a surge in the number of independent contractors and telework, among other Internet-enabled firms.

On the other hand, workers are expecting Duterte to approve the SOT bill in fulfillment of his campaign promise to end the practice of contractual employment in the Philippines. With a report by Samuel P. Medenilla

Source: https://businessmirror.com.ph/2019/07/24/businessmen-count-security-of-tenure-bills-cost-p49-billion-more-yearly/