Contractualization in the Philippines: Know Your Rights in 2023

Here in the Philippines, one of the most debated issues affecting the workforce is contractualization. It is defined as the employment practice of hiring workers on fixed-term contracts, contractualization has been a subject of concern and advocacy for decades. The impact of this labor practice on workers’ rights, job security, and overall socio-economic development has sparked heated discussions among policymakers, employers, trade unions, and the general public.

You may be just starting out in your job search or have been looking for one for the longest time. There may have been offers but most of them are contractual agreements and you may be scared to take on these positions. Don’t be! There is importance in knowing your rights as an employee. By being aware of these rights, workers can better advocate for their well-being and demand fair treatment in the workplace.

In 2011, the Department of Labor and Employment issued Department Order 18-A, Series of 2011, under Section 8, lists down the rights of employees that every contractual employee should be entitled to have as well. 

Rights of Contractual Employees

1. Safe and healthful working conditions

All workers, including those under contractual arrangements, have the right to work in a safe and healthy environment. Employers are obligated to provide a workplace that adheres to occupational health and safety standards, ensuring the well-being of their employees.

2. Service incentive leave, rest days, overtime pay, holiday pay, 13th month pay, and separation pay

These benefits are essential for workers to maintain a decent standard of living and enjoy fair compensation for their work. Regardless of employment type, workers are entitled to receive these benefits according to the labor laws in the Philippines.

3. Retirement benefits under the SSS or retirement plans of the contractor, if there is any

Workers, whether regular or contractual, should have access to retirement benefits to support them after their working years. Social Security System (SSS) contributions or any retirement plans offered by the contracting company should be made available to eligible employees.

4. Social security and welfare benefits

Contractual workers are not exempt from social security benefits, such as health insurance, maternity leave, and disability benefits. They should be covered by these programs to ensure their well-being and security during times of need. 

5. Self-organization, collective bargaining and peaceful concerted action

Workers have the right to form and join labor unions, engage in collective bargaining, and participate in peaceful concerted actions to advocate for their rights and interests. Contractual workers should not be deprived of these fundamental labor rights.

6. Security of tenure

Security of tenure is a crucial aspect of job stability and protection against unfair dismissal. Contractual workers should not face arbitrary termination and should be given a reasonable opportunity for regularization based on the nature of their work and duration of service.

Fixed-term employment contracts are generally acceptable, as long as they aren’t used to avoid providing job security. 

1. The specific description of the job, work or service to be performed by the employee:

Contractual workers have the right to know the exact nature of the tasks and responsibilities they will be doing for the company. This ensures that they are fully aware of the scope of their work and can check whether it aligns with their own skills and the initial job description. 

2. The place of work and terms and conditions of employment, including a statement of the wage rate of the individual employee:

Contractual employees must be aware of the details of the company or position that they will be working for, namely the location where they will be working and the terms and conditions of their contract. This includes details about working hours, benefits, leaves, and any other relevant aspects. More importantly, their salary rate should be clearly stated to prevent disputes and ensure that they will receive fair compensation. 

3. The term or duration of employment, which shall be coextensive with the contract of the principal and subcontractor, or with the specific phase in which the contractual employee is engaged: 

The duration of the employment should be explicitly stated in the contract. This prevents misunderstandings about the length of the contract and ensures that the contractual period aligns with the project or specific phase of work for which the employee is engaged.

4. The contractor or subcontractor shall inform the contractual employee of the foregoing terms and conditions on or before the first day of his employment:

Timely communication is crucial. Contractors or subcontractors are required to inform contractual workers of all the aforementioned terms and conditions before or on their first day of work. This allows the employee to fully understand the employment arrangement and make informed decisions about their career.

Prohibition of Contractual Employees

After determining the rights of contractual employees, Section 6 of Department Order 18-A, Series of 2011, states the following prohibitions against contractual work: 

(a) The contractor does not have substantial capital or investments in the form of tools, equipment, machineries, work premises, among others, and the employees recruited and placed are performing activities which are usually necessary or desirable to the operation of the company, or directly related to the main business of the principal within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal; or

This is called “labor-only contracting.” It happens when a contractor lacks enough resources to be an independent business and acts as a labor provider for the main company. The workers they hire perform essential tasks for the main company, which is not allowed in contractual employment. This practice is unlawful and harms job security and workers’ rights.

(b) The contractor does not exercise the right to control over the performance of the work of the employee.

Contractual employees should not be subjected to the direct control and supervision of the contractor or subcontractor. When a worker is hired under a legitimate contractual arrangement, the principal company should be responsible for the work supervision and management. If the contractor excessively controls the employee’s work or day-to-day activities, it may be indicative of a labor-only contracting scheme, which is prohibited by law.

Learn more about the other prohibitions of contractualization in the Philippines here. 

It is evident that this employment practice continues to be a significant concern for workers, employers, and the government alike. The issue of job security, fair treatment, and access to benefits remains to be at the forefront of labor issues. While contractual arrangements can be appropriate for short-term or specialized projects, it is important that their rights will continue to be upheld by employers. 

Let us work together to build a work environment that values and protects the contributions of all workers, regardless of their employment arrangements.

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Kalibrr is a recruitment technology company that aims to transform how candidates find jobs and how companies hire talent. Placing the candidate experience at the center of everything it does, we continue to attract the best talent from all over, with more than 6 million professionals and counting. Kalibrr ultimately connects these talents to companies in search of their next generation of leaders.

The only end-to-end recruitment solutions provider in Southeast Asia, Kalibrr is headquartered in Makati, Philippines, with offices in San Francisco, California, and Jakarta, Indonesia. Established in 2012, it has served over 18,000 clients and is backed by some of the world’s most powerful start-up incubators and venture capitalists. These include Y Combinator, Omidyar Network, Patamar Capital, Wavemaker Partners, and Kickstart Ventures.

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