In the Philippines, contractualisation is king


Working eight hours a day in a shopping mall, 22-year-old Melissa (not her real name) has been trying to squeeze an allowance worth just 100 pesos (US$2.15) for meals and transportation from her employers.

But so far she hasn’t succeeded. She already endures long hours standing on her high-heeled feet all day, working as a sales merchandiser at the SM Mall of Asia in Pasay City, just south of the Philippines capital, Manila.

“We are not allowed to sit down, even if our legs ache,” she told Equal Times. Employees are given an hour break for lunch and another half hour for coffee.

Melissa is one of tens of thousands of contract workers at the 55 (soon to be 56) SM chain of supermalls across the Philippines. She earns 481 pesos (US$10.32) a day as per the capital region’s daily sectoral minimum wage, and her two year service for SM qualifies her for permanent employment based on the Philippine labour code.

However, Melissa was hired by Product Image Marketing Corp., an SM Supermalls subcontractor that signed her to a total of five contracts over a two-year period.

With a surplus of cheap labour in the country, private companies and subcontractors have resorted to the so-called ‘5-5-5’ hiring practice where workers are employed on temporary contracts for five months (after six months, worker protections kick in according to Philippines labour law). These workers are then fired and rehired for another five months – and so on.

This prevents employees from becoming permanent staff and gaining the various work, social and health benefits they are entitled to.

The country’s Labour Undersecretary Nicon Fameronag told Equal Times that “most subcontractors are notorious in the 5-5-5 hiring practice, including those engaged by SM Supermalls. That’s why we need to engage both the principal company and the subcontractor into a tripartite agreement to stop the abuse of workers.”


‘One-in-three’ workers subcontracted

Subcontractors in the Philippines not only render services to SM Supermalls but to all aspects of the service sector. However, the 5-5-5 is most rampant in the construction industry, according to Fameronag.

While there is no exact estimate for the number of workers hired by subcontractors in the Philippines, the Federation of Free Workers (FFW) trade union confederation puts the figure as high as one-in-three workers in the country.

Fameronag told Equal Times that the Department of Labor and Employment (Dole) is running ongoing investigations into illegal hiring practices.

“[But] we cannot be too harsh in imposing sanctions against these companies,” he said, adding that “the welfare of employees is at stake.”

He said the labour department takes a “developmental approach” by meeting with principal employers and subcontractors to get them to commit to the labour code, under which the use of the 5-5-5 practice is prohibited.

Fameronag said this is more productive than terminating the Certificates of Compliance (CoC) issued by Dole to principle employers and subcontractors, as this would result in recruitment freezes and job losses.

SM Supermalls is the country’s biggest chain of malls, with an estimated 200,000 workers. Its founder and owner, Henry Sy, was recently named the richest person in the Philippines, according to the 2016 Forbes Magazine List of World’s Billionaires.

The 91-year-old tycoon has a net worth of US$15.1 billion. His anchor firm – SM Investments Corp – is the largest retailer in the Philippines with over 200 individual outlets across the country.

Besides shopping malls, SM has interests in real estate, banking and energy. The company has also established five shopping malls in China.

Lawyer Sonny Matula, president of the FFW, told Equal Times that “there had been attempts to unionise workers at SM Supermalls by several trade unions such as FFW, Kilusang Mayon Uno [May 1st Movement] and the Trade Union Congress of the Philippines, but all of them failed due to significant resistance from the management. This makes it easy for subcontractors to engage in 5-5-5 hiring practice.”


D.O. 18-A

In November 2011, Dole issued Department Order 18-A to stop the abuse of contract workers.

According to the Philippine Minister of Labour Rosalinda Baldoz, as a result, the number of subcontracting firms operating legally in the Philippines has plummeted from 17,000 in 2011 to just 4,000 in 2015.

“The order (D.O 18-A) leads us to achieve professional and ethical subcontracting where subcontractors are compliant with labour standards and occupational safety and health standards,” Baldoz told Equal Times.

D.O. 18-A also gives equal rights to workers hired directly by employers and to those hired by subcontractors. It offers the chance of regularisation after six months of consecutive service, health and social insurance, the right to form a union and collective bargaining, holiday pay and vacation and sick leave.

But despite the enforcement of D.O.-18A, SM continues to use the 5-5-5 hiring practice.

An SM management official, who spoke on the condition of anonymity, told Equal Times that approximately 50 per cent of the company’s total workforce is hired by subcontractors, while the other 50 per cent are hired directly by the company.

But the official said that the company takes the law very seriously.

“When it comes to subcontractors, we check on their compliance to the labour code,” the official told Equal Times.

Compliance, however, remains a major issue. To prevent subcontractors from using the 5-5-5, a CoC is issued to both the principal and the subcontractor indicating the period of workers’ contracts.

This means that if SM Supermalls agrees to give a six-month contract to its subcontractor, all employees hired by the latter should also be hired for six months – not five.

But most workers don’t know this – and those that do don’t feel they are in a position to challenge any breaches.

Melissa told Equal Times that she was unaware that laws existed to protect her as a worker.

Like many young people in the Philippines, poverty and a lack of opportunity drove her to move to Manila to search for work. Low wages and insecure contracts are unfortunately considered normal.

Matula says that the country’s trade unions will continue to organise workers to fight precarious working conditions and the widespread practice of contractualisation in the Philippines.

He said the FFW supports Senate Bill 3030, filed by Senator Aquilino Pimentel III in December last year to further strengthen the fight against labour contractualisation by imposing stiffer sanctions against private companies and subcontractors that violate the labour code.

Melissa says it is her dream to find a job with a good salary, security of tenure and benefits, particularly medical insurance. She was twice hospitalised with the flu while working at SM Supermalls. Without medical insurance, her small savings were depleted and she had to borrow money from friends.

“My salary was also reduced because of the absences I incurred. I hope my next job will finally allow me to have some security in my life.”