Security of tenure

Michael Alan Hamlin

Posted on October 22, 2010

Department of Trade & Industry Secretary Gregory L. Domingo recently expressed support for calls to overhaul the Philippines’ antiquated labor laws, which make terminating poorly performing employees mind-numbingly difficult and expressly prevent women from working at night. In an environment in which many companies struggle to find qualified employees and retain performers, Mr. Domingo’s support of labor reform makes a great deal of sense.

But in a clear demonstration of why reasonable reform is so difficult to undertake, labor groups immediately denounced Mr. Domingo’s reasoned suggestion with the same tired arguments that have helped keep the Philippines mired in poverty since independence. For labor leaders and politicians perennially courting votes, the unthinking preservation of labor laws that don’t work makes for great sound bytes. But it is their constituency that suffers the most as a result.

Mr. Domingo made his remarks during a business conference last week, singling out the need to “relax security of tenure” provisions to make the Philippines more competitive and align the nation with modern labor practices around the region and the world. He acknowledged, however, the legal repercussions and the hurdle they present to reform. In doing so, Mr. Domingo made it clear that if the Philippines chooses not to pursue reform and enhanced competitiveness, who’s responsible should be clear.

As if on cue, former Senator Ernesto Herrrera, who is secretary-general of the Trade Union Congress of the Philippines (TUCPP), issued a press statement saying Mr. Domingo, “has drawn criticism for his proposal to attract fresh investments by cutting short the right to security of tenure enjoyed by workers.” In the view of executives, the principal impact of security of tenure has been to limit hiring while allowing poorly performing workers to even further limit opportunity for Filipinos who aspire to productive employment.

Earlier this year the Employers Confederation of the Philippines (ECoP) also called for amending certain provisions of the Labor Code. In a resolution released to media, ECoP said, “The archaic and counter-productive provisions of the Labor code continue to hamper growth and economic development of the country, hinder the promotion of new investments and employment opportunities, and limit or restrict the avenues by which business can exercise management prerogative.”

Although the Labor Code is not solely responsible for the Philippines’ poor record at attracting investment and generating employment, the regressive practices it enshrines are regularly cited by investors as a significant disincentive, even in the business process outsourcing (BPO) industry, which has grown rapidly to about 500,000 direct employees over the past decade.

About half of those employees are women, who are not-according to the Labor Code-allowed to be employed for night work. Imagine the impact on the industry if for some bizarre reason government decided to suddenly enforce that provision. Almost overnight, the industry would begin to disappear since many BPO workers are assigned to shifts that coincide with the working day in western markets.

The Department of Labor & Employment has informally acknowledged that it won’t move to do so. But if that’s the case, why should it remain a legal impediment to doing business and creating jobs? It shouldn’t. But the provision stays on the books precisely because labor leaders resolutely refuse to acknowledge that the world and global business has changed in significant ways since the Labor Code became law in 1974.

And the chief reason for that intransigence is security of tenure and the upper hand it provides workers in every dispute with management. “We work so hard to recruit qualified workers, it is unfair to make it so hard to dismiss one,” one executive told me in a recent interview. Security of tenure increases HR costs for employers on many levels, including administrative and legal processes.

But at the heart of the issue is the requirement to keep a dysfunctional worker in place while a review is taking place. The employee can’t be reassigned because doing so can be construed as “constructive dismissal,” or intentionally creating circumstances intended to increase pressure for the employee to voluntarily resign. Meanwhile, the underperformer continues to displease clients and otherwise underperform. Other employees may become demoralized, and the impact on organizational culture compounds.

Mr. Domingo was brave to raise the reform call, which Mr. Herrera likened to “using workers as sacrificial lambs in the drive to lure new capital.” But who’s using whom? Unemployment and especially under employment in the Philippines strongly suggest that it is labor leaders opposed to reasonable reforms that are making workers sacrificial lambs to their political ambitions.

After all, who is doing the most for most the workers? I’d suggest it’s those creating the jobs.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand . Write him at and follow him on Twitter, Facebook and LinkedIn.). Copyright © 2010 Michael Alan Hamlin. All Rights Reserved.)

No Comments

Leave a response