In the know: Contracting or subcontracting

Contracting or subcontracting is allowed and governed by the Labor Code of the Philippines, but there are practices that circumvent the law, such as “endo,” shortened term for “end of contract,” also referred to as contractualization.

In 2011, the Department of Labor and Employment issued Department Order 18-A, the implementing rules on contracting and subcontracting.

An arrangement is legitimate if a contractor is registered in accordance with defined rules; carries a distinct and independent business; performs the job, work or service on its own responsibility and manner; and is free from control and direction of the principal in all matters connected with the performance of work except the results.

The contractor should also have a minimum capital of P3 million.

At the same time, the service agreement between the contractor and principal should ensure compliance with all the rights and benefits under labor laws.

The same rules cover the practice of endo, which is typically used by companies to let go of workers before they reach six months so they would not be regularized and be entitled to benefits.

The order prohibits the practice, saying that subcontracting is a prohibited activity when it is done through repeated hiring of workers for a five- to six-month employment contract under the same employer or service agreement of the same duration. Compiled by Ana Roa, Inquirer Research

Sources: Inquirer Archives, dole.gov.ph