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What You Need to Learn About Endo or Contractualization

Mar 9, 2020

Photo c/o OCEG

There are many companies in the Philippines who have resorted to hiring people on a contractual basis even if they are working on regular, ongoing tasks like normal employees would in a company. As a result, these non-regular employees are deprived of the opportunity to get secure, long-term employment. In most cases, they also do not receive the employee benefits due them.

What is “endo?”

Endo is a colloquial term coined from shortening the phrase, “end-of-contract.” Here in our country, employers are required to regularize employees after six (6) months of working for the company, so some companies try to game the system by means of only hiring workers for a maximum of five (5) months. The governing law regarding this matter is detailed under Article 281 of the Labor Code of the Philippines, which reads:

Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.

After the short contract expires, they hire them again for another five months, and so on. This is one of the major cost-cutting techniques that companies participate in. Through the endo scheme, they avoid regularizing workers, and therefore avoid the act of granting benefits like 13th month pay, annual leaves, health benefits, social security benefits, and other similar perks, which in turn reduces employment costs and company spending.

Many companies hire seasonal workers to augment their output during peak months and let go of them during low season because their services are no longer needed. This is why the practice works for them. This employment system mostly affects minimum wage earners, part-timers, and working students. It happens because a lot of people are available to work for cheap.

Is endo legal by any means?

This issue has been hotly discussed in recent times because it was a campaign promise under the Duterte administration. In 2017, the Department of Labor and Employment (DOLE) issued an order implementing amendments to Articles 106 to 109 of the Labor Code, which declares labor-only contracting or subcontracting as illegal. The guiding principles under this are detailed below:

Contracting and subcontracting arrangements are expressly allowed by law and are subject to regulation for the promotion of employment and the observance of the rights of workers to just and humane conditions of work, security of tenure, self-organization, and collective bargaining. Labor-only contracting as defined herein shall be prohibited.

Photo c/o UCL

As soon as it was announced, some 195 establishments voluntarily regularized 10,532 workers. Majority of these newly regularized employees are from SM malls and 7 Eleven convenience stores. The government urged other private companies to follow suit, and security of tenure became part of the labor force’s conversations again.

As expected, it elicited negative sentiments among the business sector and the corporate giants. However, the new legislation had a lot of loopholes that made it possible for those who engage in unfair labor practices to continue. The declaration only covered labor-only contracting, which means that it only covers companies that purely have contractual employees. This means that if a fast food chain or a mall has regularized employees, such as an operations manager or a human resources person, they can still employ people on a contractual basis.

Nevertheless, even with the flawed rules, the DOLE was able to bring down the number of registered subcontractors around the country from 17,000 to over 5,581.

Preserving the dignity of the Filipino worker

There are other compelling reasons why labor laws regarding this practice of endo should be studied and amended. If you take a look at our current landscape, we have millions of OFWs or Overseas Filipino Workers who remit their earnings here – bringing money in – and fuels our economy by a lot. There is also a presence of outsourced jobs from overseas that have provided locals with gainful employment. Both these sectors are home to millions of employees who work in jobs with a style very similar to contracting but they arguably enjoy some of the most premium benefits in terms of healthcare and allowances. If this kind of contractual set-up works for them, then why shouldn’t it be applied elsewhere?

The problems actually lie not in the work arrangement but with the abusive practices that come with it. Filipino workers, especially the younger ones, don’t care about tenure as much as the old days. What they care about is better salary, better benefits, and better treatment. If companies continue to exploit or deprive employees of their rights to basic benefits such as healthcare and social security, it would create an unhealthy, demotivated, and unproductive workforce, which in the long run could be something that kills businesses.

While there are major steps being undertaken to put an end to endo, the scheme is still putting underemployed Filipinos in a tight spot today. It has also allowed companies to tread the morally ambiguous waters of contractualization and has propagated a culture of money over people.

If you’re one of the millions of Filipino workers facing the reality of endo, and you feel like you’ve ran out of options regarding your finances, then it’s high time that you check out Blend PH. We’re a peer-to-peer marketplace that enables the common Filipino to pursue his or her specific financial goals through borrowing and lending. We have short-term loans that you can avail of with flexible interest rates and terms. It’s Filipinos empowering fellow Filipinos.

If you’re in this sticky situation, the best thing is to ensure that you have enough resources to power through as you make your way to your next job or as you wait for your contract to be renewed once your employment contract ends. You need to educate yourself regarding your options and alternatives and remain hopeful that work arrangements and opportunities will change for you one day.