Is Contractualization Legal

In the Philippines, contractualization, or the practice of hiring workers on a contractual basis, has been a controversial issue for many years. Some argue that it provides flexibility for businesses and creates more job opportunities, while others claim that it perpetuates low wages, job insecurity, and exploitation of workers.

So, is contractualization legal in the Philippines?

The short answer is yes, but with some conditions.

Under the Labor Code of the Philippines, there are three types of employment arrangements: regular, probationary, and project-based employment. Regular employment refers to a work arrangement where an employee is engaged to perform work that is necessary or desirable to the business, and the employment is not limited to a specific project or period.

Probationary employment, on the other hand, is a trial period for an employee to assess their skills and qualifications before being considered for regular employment. This period should not exceed six months.

Finally, project-based employment is when an employee is hired to perform work for a specific project or period. Once the project is completed, the employment is terminated.

The problem with contractualization arises when employers abuse these types of employment arrangements by hiring workers on a contractual basis even if the work is not project-based, or by renewing the contracts of their employees repeatedly to avoid granting regular employment status and the associated benefits that come with it.

In response to this issue, in 2018, the Department of Labor and Employment (DOLE) issued Department Order (DO) No. 174, which prohibits labor-only contracting and regulates legitimate job contracting. Labor-only contracting refers to the practice of hiring workers through a contractor or a subcontractor, but the workers are under the control and supervision of the principal employer, not the contractor.

Under DO 174, a legitimate job contractor is required to have substantial capital or investment, and it must be registered with DOLE and provide social and welfare benefits to its employees. The principal employer should also ensure that the contractor complies with all labor laws and standards, and should not allow labor-only contracting.

Moreover, DO 174 provides guidelines for the determination of job contracting, which takes into account factors such as the nature of the work, the length of the job, and the skills needed to perform the work.

In conclusion, contractualization is legal in the Philippines, but it should be regulated to prevent abuse and exploitation of workers. Employers should comply with the Labor Code and DOLE regulations, and workers should be aware of their rights and seek assistance from relevant authorities if they feel that their rights are being violated.