The Havoc of Contractualization

The practice of hiring workers on a labor-only contractual basis has deprived workers of their right to job security, benefits, right to organization and grievance. This practice, known as contractualization, has reached alarming levels in our country, where jobs are scarce and the army of surplus labor is increasing by the year. It can no longer be ignored or concealed.

Vol. VII, No. 30, September 2-8, 2007

BACOLOD CITY – “For 14 years as radio operator-technician in PLDT, the company had practically been my second home; it is where I earned my income…established friendships, and became a union member. Recently our union received a management notice of termination for hundreds of workers, and I am one of them. It’s too sad because my family is not prepared for this.”

Such is the story of Rommel Bebanco, one of the six Bacolod Philippine Long Distance Telephone Company (PLDT) radio operators included in the notice of termination.

PLDT Union Council member Ronnie Gedoria announced early this week that they have already filed a notice of strike, following the Aug. 16, 2007 management communiqué to the union concerning its Notice of Termination of employees.

The notice of termination, which will take effect on Sept. 15, 2007, will affect 575 employees nationwide. “Fifty will be affected in the Visayas, including 6 radio technicians of the PLDT-Bacolod office, 29 in Mindanao, 92 in Cebu, and 404 in Manila/Luzon, all in four major divisions of the PLDT Fleet Management, Operators Services, Directories Assistance and the Mindanao Core Network,” Gedoria said.

In its notice, the PLDT management justified its move saying that a number of items have become redundant because of technological changes, like the use of fiber optic technology and other automation schemes which supposedly reduce manpower requirements.

Gedoria said that they had anticipated this in the late 1990s after the PLDT management came out in 1995 with its Early Retirement Program (ERP) and Manpower Reduction Program (MRP). Both the ERP and the MRP resulted in the reduction of PLDT’s regular workforce.

“Before 1995, we used to have a (regular) workforce of 16,000, now we barely have 3,000 in our regular workforce nationwide, and the rest are contractuals,” he said.

Gedoria revealed that the PLDT’s Bacolod branch used to have over 600 workers, but now it has a regular workforce of only 40 while the majority of workers are contractuals. In Iloilo, Gedoria also disclosed, there are only 45 regular workers; the rest are contractuals.

Gedoria believes that the management move is unfair and malicious because it continues to hire contractual employees – a practice, he said, that prevents them from unionizing and exercising other rights.

“This is also a violation of our Collective Bargaining Agreement (CBA) which has a proviso that in case of redundancy, the management shall transfer the affected employees to other departments, and retrain them,” he said. “What the company has done to us is in bad faith and with malice, and unjustifiable.”

Gedoria appealed to all other workers’ unions and federations to unite and fight what he described as the bad trend of contractualization, particularly since it goes against job security and workers’ exercise of other basic rights.

Contractualization scourge

The practice of hiring workers on a labor-only contractual basis has deprived workers of their right to job security, benefits, right to organization and grievance.

This practice, known as contractualization, has reached alarming levels in our country, where jobs are scarce and the army of surplus labor is increasing by the year. It can no longer be ignored or concealed.

Estimates from available official and labor sources reveal that from 1995 to 2005, the number of contractual workers had soared from 65 to as much as 78 percent of the country’s 12 million active workers & farm workers out of more than 40 million labor force.

This situation has actually prompted some legislators last year led by the House of Representatives Committee on Labor to call for a congressional inquiry on the issue.

According to studies made by independent research outfit IBON Foundation, despite prohibitions by labor laws, contractualization has given capitalists, including agricultural plantations and agribusiness companies, the leeway to evade their obligations to their regular workers and prevent them from organizing unions and exercising their labor rights.

Across the country, contractualization has been surging and rendering thousands of workers and farm workers powerless in negotiating for better pay and benefits and defending themselves from unfair labor practices.

A case in point is the Victorias Milling Company (VMC) in Victorias City, Negros Occidental, the biggest sugar refinery in Asia.

VMC Industrial Workers Association (VIWA) president Jonathan Dequina said that only 855 regular workers and 265 supervisors belonging to VMC supervisors union are left from a high of 6,000 in early 1990s.

“What is ironical and insulting to us however is that the company has more than 3,000 contractuals spread in almost all of the 20 departments of VMC, and its subsidiary companies like the Victorias Food Processing Corp. and Victorias Quality Packaging Corp.,” Dequina said.

Dequina said that VMC’s declaration of irreversible financial loss in 1996 did not result in the company’s shutdown but in the “re-energization” of the company. A similar fortune greeted the company in recent years with its Voluntary Attrition Program (VAP), which simply means cost-cutting and downsizing, Dequina also said.

“The 265 supervisors are already ‘programmed’ for termination; eventually most, if not all of us regular workers will also be replaced by an army of contractuals,” added Dequina.

Dequina pointed that contracting agencies now “lurk” in every department of VMC and its subsidiary companies, making firing easier and the hiring more difficult.

Jaime Valdez, an organizer of the National Federation of Labor Unions (NAFLU) which is affiliated with the Kilusang Mayo Uno (KMU or May 1st Movement), also cited the case of Negros Navigation shipping company. Most of the commercial and cargo shipping vessels of the company, now owned by Metro Pacific, are run by contractuals – unlike in the 1980s and 1990s.

Valdez said that the ships’ canteens, maintenance and janitorial divisions have been contracted to private businesses with foreign stocks based in Bacolod, Manila, and Iloilo. These companies provide contract workers either as “regular contractuals” (those given priority in hiring and rehiring) or as “relievers” (substitutes when there are certain personnel unavailable) to Negros Navigation ships. These contract workers do not enjoy the wages, benefits and rights of regular workers. Applicants are also charged for all their pre-employment tests.

In most Negros sugar plantation farms, contractualization in the form of “pakyao” has also become common.

The Bacolod-based Center for Investigative Research and Multimedia Services (CIRMS), in its recent study on the impact of neoliberal policies on the sugar industry has noted the decreasing regular work force, and the surge in the number of contractuals, casuals, pakyao workers, and an army of surplus labor.

The pakyao system or piece-rate labor arrangement has replaced the work arrangement in many sugar farms in Negros. Workers in pakyao arrangement set their own work time and methods, divide among themselves the contracted price which is usually lower than the minimum wage, and do not enjoy basic benefits provided by the labor law. They need to work harder to get more piece-rate jobs and earn a better income.

In Central Visayas, contractualization has also taken a toll on Cebuano workers and the workers movement.

A source from Alyansa ng Manggagawa sa Sugbu (AMA Sugbu or Workers’ Alliance in Cebu) said that contractualization is quite rampant not only in almost all manufacturing companies, but also in service sector industries. The source also cited that in the Mactan Export Processing Zone (MEPZ) alone, almost all of the 108 companies in the zone employ various forms of contractualization and labor flexibility.

He said that in Central Visayas, about 90 percent of the top 500 big companies and around 75 percent of the estimated 10,000 medium companies and small enterprises are engaged in contractualization.

He further noted that Japanese-owned Mitsumi Corp., operating in Danao City and engaged in the production of computers and software peripherals reportedly has only 2,000 regular workers out of its 16,743 workers, and the number of contractuals is still increasing.

It also said that in the shipping sector, considered part of the backbone of Cebu’s economy, most of commercial shipping companies are engaged in various forms of contractualization. “It is even worse in shipping conditions because the management and yellow unions employ gangster rule to terrorize militant workers unions and their organizers.

A report of the Center for Women’s Resources (CWR) said among the worse practitioners of contractualization in the country today is the Henry Sy-owned ShoeMart whose malls nationwide employ more than 60,000 contractual employees and only a few thousand regular workers. The CWR report said that the SM management has been firing and rehiring contractuals, with employment contracts lasting for three to five months only.

Disbandment of unions

Furthermore, the rampant use of contractualization and labor flexibility schemes has also caused the disbandment of hundreds of unions.

In Western Visayas, based on 2004 data provided by the National Wages and Productivity Commission (NWPC) and the Regional Tripartite Wages and Productivity Board (RTWPB) 6, pointed that only 8 percent of the 425,819 workers in 50,000 plus business establishments and plantation farms are organized into different kinds of associations. Of the 8 percent, only 2.1 percent have CBAs.

Winnie Sancho, labor representative in the RTWPB 6, said that contractualization practically kill the workers and the workers movement. “Under such scheme, the workers are always at the mercy of the capital,” he said.

“The issue of job security has become the main issue today of the workers, and even in the private sector; no one is safe anymore,” he added. (

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