1

INTRODUCTION

Contractualization or labor contractualization is the replacing of regular workers with

temporary workers who receive lower wages with no or less benefits. They do the work of
regular workers for a specified and limited period of time, usually less than six months. The
work they do is desirable and necessary for the companys survival, but they never become
regular employees even if they get rehired repeatedly under new contracts (2003).
In this current administration, the abolishment of contractualization is one of the current
issues the state is facing. Labor contractualization has been a subject of discussions in the
congress and among Filipino citizens. This arises due to the issues of unemployment and under
employment. It is undeniable that most of the biggest businesses in the country are involve in
this situation. Latest news include an article about Anak Pawis Partylist Rep. Ariel Casilao filing
a measure abolishing the contractual employment scheme in the country. During the campaign
period, President Duterte vowed to abolish the contractualization scheme, which he described as
unfair labor practice and tool of exploitation against the working class.

The main purpose of

every business is to gain profit. The most common way to achieve this is through minimizing the
expenses of the company. Most business owners today engage in contractualization of
employees. The jobs available for them usually does not require a college degree and therefore
would give them minimum wage. Also, contractual employees do not receive any benefits such
as SSS, Philhealth, and Pag-IBIG contributions unlike the regular employees. This is one
evidence that businesses can lessen their costs because they are not required to pay high amount
of salaries to their workers. This situation is not advantageous to the employees since it does not
give the security of a permanent job. It also cannot develop their skills properly given the period

of time they have for one job and the great possibility that they would have another job few
months later which is different from that of the current. The businesses may have lesser expenses
however the quality of services they offer may be compromised thus, affecting their sales and net
income.
As graduating students and as future job-seekers, the proponents are
concerned with job opportunities and present employment situations in the
country. This is one of the reasons why the recent issue about contractual
employment has caught the interest of the researchers. Also, given the
course, the group is exposed to business operations and this knowledge
opens the possibilities of us becoming business owners in the future.
Combining the knowledge and the interest of the members, the researchers
decided to conduct a study that would clarify the reasons of business owners
and managers for engaging in contractual employment and to determine the
perceptions of employers on abolishing contractual employment.

Statement of the Problem

This paper aims to find out the management perception on abolishing contractual
employment. It aimed to seek answers to the following questions:
1. What composes the company profile of entities who are engaging in contractual
employment?
2. What are the reasons of businesses for engaging in contractual employment?
3. What are the managements perceived advantages of abolishing contractual employment?
4. What are the managements perceived disadvantages of abolishing contractual
employment?

Conceptual Framework

This study focused on the management perceptions on abolishing contractual

employment of businesses within Bacolod City. The researchers intended to provide answers
from companies with regards to their perceived advantages and disadvantages of the abolishment
of contractual employment. The main rationale of this study is to contribute information as
decision making tools for companies whether the abolishment of contractualization would be a
best decision to improve business operations and productivity.
The figure depicts a relationship wherein the study inputs the companys profile, the
reasons of businesses for engaging in contractual employment to come up with perceived
advantages and disadvantages of abolishing contractualization and later on derive
recommendations as an output to the participants with regards to their operations and decision
making as to whether or not to abolish contractualization.
It is assumed that the respondents who are exposed to the abolishment of contractual
employment are likely to have negative effects towards business operations since they will have
an additional cost for the benefits that regular employees must receive such as SSS, PhilHealth,
PAG-IBIG, retirement benefits and the like. But in the long run, it will have positive effects
towards operations of the business in the areas where they will no longer have to spend for
training and recruitment costs for regular employees. Also, in terms of the quality of the service,
employees will likely have a positive influence over the attitudes concerning security and the
best way to perform their duties since there will be a presence of induction and investment in
their skills.

Socio-demographic characteristics of the businesses such as company information, size

of employees, etc are considered as independent variables which will influence respondents
perception to abolishment of contractual employment.

Scope and Limitations

The researchers investigated management perceptions on abolishing contractual
employment of businesses in Bacolod City. The study has congregated a sample from different
types of businesses and organizations that are engaging in contractual employment based on the
Philippine Statistics Authority 2014 survey of employment regarding statistics on non-regular
workers. The participants belong in the Top 20 result of the survey. It is with best efforts that the
proponents reached out to businesses in different industries in order to maximize the sample size.
The respondents of this study were the only entities present in the city that were willing to

participate because of the sensitivity of the topic. Most of the respondents originally chosen
rejected the letters provided and refused to be interviewed.
This study includes opinions of businesses managers and owners regarding contractual
employment and its effects on business operations specifically on financial aspects. Also, the
focus of the study is on the different advantages and disadvantages of having contract workers
involved in business operations.
Other aspects of business operations such as product control and financial aspect are
not given emphasis on this paper. The mere purpose of this study is to determine the
perceptions of the organizations management on abolishing contractual employment. The
reliability of information gathered and the results of the study are only available to
researchers based on Bacolod City. Given the time constraint, the study will be conducted in
the span of four (4) months starting from June to October of 2016.
Significance of the Study
This study is significant to the following:
Employers. They may know the advantages and disadvantages of contractual
employment to their business operations both in the short run and the long run. This study may
also serve as an instrument to identify possible risks and benefits of abolishing contractual
employment at an early stage. Since this research involves gathering the sentiments of the
contractual employees, they may later on develop strategies to boost employee morals for
products and services improvement.
Contractual Employees. This study intends to enrich their knowledge about their
situation and to improve the understanding of their employers to help them have better and

permanent jobs. Also, this research may highlight their rights that may pave the way of giving
them the benefits they need and deserve.
Future Researchers. The study may pave way for better and more extensive future study
regarding contractual employment.
Academe. The study may improve learning environment by providing new information
that would help both educators and students be aware and understand current issues that the real
world is facing.
Definition of Terms
Abolish. Conceptually, it refers to the taking out of a companys mission statements,
organizational charts, or any written policies. (Kruse, K. 2016) Operationally, Abolish refers to
the nullification of contractual employment of businesses in Bacolod City.
Contractual Employment. Conceptually, it is an employment that requires employees to
sign and agree to terms of a contract before beginning to work. Contractual work is usually for a
specified amount of time and ends upon completion of a project or assignment. (Tucker, K. n.d.)
Operationally, Contractual Employment refers to the current situation of most of the employees
in businesses within Bacolod City which is being studied in order to know the effects of
abolishing such to business operations.
Management. Conceptually, it can be defined as achieving goals in a way that makes the
best use of all resources. (McCrimmon, M.) Operationally, Management refers to the employers
of businesses within Bacolod City involved in contractual employment
Perception. Conceptually, it can be defined as an individuals ability to undertand
difference. (Romanov, N. Operationally, Perception refers to the opinions and thoughts of the
employers of businesses within Bacolod City towards abolishing of contractual employment.
Review of Related Literature

Contractualization is a common employer practice of hiring people for a period not

exceeding five months. Employers would normally get the services of manpower companies to
supply them contractual employees after five months to ensure continuity. Nowadays, it is
commonly known as outsourcing. They do this to save on costs and avoid the hassle of
regularizing employees once they have worked continuously for six months. While
contractualization may be boon to employers, it may be bane to employees over the long term.
The practice of contractualization prevents employees to attain job security since their contracts
are terminated every five months. But for the unemployed, contractualization provides job
opportunity albeit on short-term basis. This allows the worker to be trained and learn new skills
that she can use in her next job. (Ong, H. 2013)
The employers who engage in this practice claim they hire contractual employees to meet
the seasonal requirements of their business and that requiring them to be made regular will increase
their operational costs and, in the process, adversely affect their revenue stream.
With the aid of lawyers, these employers have come up with ingenious ways to go around
the law on regular employment by either outsourcing the jobs normally handled by regular
employees, or classifying certain aspects of their business as special projects and hiring outsiders
to manage them, or retiring regular employees then hiring them back to do the same work on
contractual basis. (Palabrica, R. 2016)
Wandera (2011) stated in her study that the number of companies using temporary
workers was on the increase as global competition increased and the urge to cut down on costs of
undertaking businesses in order to remain competitive rises. According to Kalleberg (2000), due
to the rapid innovativeness in science and the ever increasing competitiveness, companies have

established policies of flexibility and adaptation to the economic changes in order to keep profits
as high as they can (Wandera, H., 2011).
This said competition led most of the companies to have a certain number of short term
workers as a way to deal with periods of decreased productivity or lower demand (Brewster, C.,
Tregaskis, O., & Valverde, M., 2000).
Dr. Benito L. Teehankee, in an online article, answered the question: Is contractualization
necessary to properly manage worker performance? Managers have the duty to exercise
reasonable control over the quality and volume of work done by workers. Workers who fail to
perform or otherwise neglect their duties should be corrected through performance feedback and,
when needed, formal discipline with due process. This can, of course, lead to termination when
the workers refuse to cooperate.
Strangely, many believe that the best way to guarantee performance is to altogether
remove security of tenure and due process for workers. But if managers do not know how to
engage employees to contribute good work and instead can only extract performance through the
fear of imminent job loss, how can Filipino businesses be truly competitive? Fear and insecurity
are incompatible with sustainable, high-quality work. Managers need to move away from a fearfor-compliance approach to an engagement-for-performance strategy. (Teehankee, B. 2016)
According to Sicat (2016), in his online article, contractualization was one of the ways to
keep labor costs down but is mainly true to employment where there are a lot of applicants and
has become as an escape route to companies who are under the regulations of the Philippine
labor market. Tackling about the tightness of a specific skill in the labor market, such has led to
the rise of wages (Sicat, G.P., 2015).

On the other hand, Michael Wolfe (2016) stated in his article that one
of the disadvantages of contractual companies is that it can create a litigious
atmosphere in the company for people who are forced to sign contracts
which arent coinciding in their own terms. They will most likely seek legal
counsel for that (Wolfe, M., 2016).
Bernabe, Endozo, & Pacia (2014) in their article from Inquirer.net
entitled Worker hired, fired every 5 months, cited a data from research
group Ibon Foundation, Kilusang Mayo Uno chair Elmer Labog said that in
2006, the profits of the top 1,000 corporations in the country reached P599
billion and just after six years, in 2012, their profits almost doubled to P1.08
trillion. Ducanes added that if the result of contractualization is a lower
labor standardfor example, wages are fixed always at minimum wage and
workers have no other benefits and the lower-skilled people are not
employed, then this contributes to worsening inequality in the country. He
emphasized that the government keeps on saying that human resource is
our biggest asset but they cannot even protect and uphold the rights of the
workers (Bernabe, K., Endozo, P. P., & Pacia, S., 2014).

Companies and the contracting agencies described contractualization as a means to

promote cost efficiency and a way to avoid having labor unions. The contracting agencies also
view contractualization as a means to provide services to companies. Therefore it is their duty to
ensure that specifications requested or imposed by the company are strictly adhered to.

10

Contractual workers, on the other hand, view contractualization as a means to diminish

their control on their working condition and environment. Although this perception greatly lowers
their job satisfaction and motivation as employees, they feel helpless and incapable of changing
their situation. They are also unsure as to who or which institution can help change their plight and
take care of their well-being as employees.
The human resources (HR) practitioners clearly stated in the interviews that the contractual
workers are not their employees, all employee- or labor-related concerns and issues must be dealt
with by the agency. However, the agencies also claim that they are not their employees since they
only serve as a go-between.
The issue of which organization should look after the welfare of contractual workers is
highlighted even more if it involves fly-by-night agencies that do not have sufficient capital or
resources. Both HR practitioners and worker interviewees emphasized that such agencies make the
employment conditions worse for contractual employees. (Cainglet, Vega, Zapata, 2012)
Docena, in an online article, stated that if we ban or significantly limit contractualization,
they argue, many companies will either close down or not be able to open to begin with. Their
profits will fall, many workers will lose their jobs, the economy will contract, and all Filipinos
will consequently suffer. Hence, to ban or limit contractualization is not only anti-worker but
also anti-Filipino. This argument is not only self-serving, it is also wrong.
By allowing capitalists to intensify their exploitation of workers, contractualization actually
enables capitalists to pay workers less for the same work, stunt economic development, and
therefore harm the interests of all Filipinos including of capitalists themselves. But, more than

11

that, contractualization also enables capitalists to weaken the working classs ability to resist
exploitation, organize collectively, and fight for a better society. (Docena, H. 2016)
Section 6 of the Philippine labor code defines labor-only contracting as a set-up where a
labor supplier or recruiter supplies workers to a principal employer but without the necessary
tools or enough funds to perform services for the principal. The workers would then perform
services that are essential to the business of the principal but the contractor cannot control or
supervise the work of the employee. This set-up necessitates the use of the labor supplier as a
cabo or middle man to handle the supply of workers to the principal, and at the same time, help
the principal avoid responsibility of managing employees. Employees are then left with the cabo,
who doesnt have a direct hand or funds to shoulder the costs of workers wages and benefits.
This is to prevent an employer-employee relationship between principal and contract
employee, which lets the principal avoid any direct responsibility for manpower and its
subsequent labor cost. This arrangement benefits the principal because they are able to benefit
from shabby treatment of contractual employees and they dont have to bear any responsibility
for them (Maklang, K., 2014).
Casilao said contractualization is not a mere short-term tactic to reduce costs or to defeat
a union organizing drive, but a long-term strategy for shedding all obligations to workers and
eliminating all employee rights based on the existence of an employment relationship. Citing
recent studies, Casilao said contractualization is extensive in the Philippines, with seven out of
10 firms implementing combinations of flexible work arrangements, and with estimates showing
that contractuals now outnumber regulars among Filipino workers. As labor groups and
advocates have described, contractualization is a dagger in the hearts of Filipino workers.

12

Casilao said majority of the countrys 37.6 million employed persons are either employed
in contractual, temporary, probationary, seasonal and odd jobs. Based on official government
data, an estimate of 44 percent of workers employed in various industries are not regulars. In the
past decade, Casilao said contractual employment proliferated due to the neoliberal policies of
globalization. The bill defines contractor or subcontractor as a person or an entity with whom an
employer or principal enters into a contract for the performance of the latters work. Under the
bill, when the contractor or subcontractor contracts to perform work that is necessary and
desirable for the business of the employer, the employees or workers of the contractor or
subcontractor shall be considered the employees of the employer and not of the contractor or
subcontractor. The bill provides further that the contractor, subcontractor, agency, person or
intermediary shall be considered merely as agent of the employer or the principal who shall be
responsible for the workers in the same manner and extent as if the latter were directly employed
by the said employer or principal (2016).
According to Cid Tereso (2016), contractualization was applied in the Philippines during
the time when the economy was unstable and when the unemployment rate was very high.
However theres no need to abolish it because as long as the economy of the Philippines stays
robust and improving and the cost of doing business is reduced due to contractualization, then it
wont lower the profit margins of companies here in the Philippines (Schnabel, C. & Tereso, C.,
2016).
Aspillera (2016) stated in his article, during the heights of contractualization, companies
experienced impressive increases in net profits. For example, Ayala Land Inc., their first 9
months of profit was 8.6 Billion which is 30% higher than the previous years 6.62 Billion. Coal

13

Asia Holdings also revalued their income of 500 million to 714 Million, Globe telecom in
their first quarter, they reached 2.5 billion from the 2 billion last year. It keeps on improving.
Also Manila Water Co. had an 11% increase in net income reaching them to 2.91 billion and also
for Megaworld, they had a 15% increase in net income yielding them an income of 4.45 billion.
But still at the back of these impressive increases in net profit are the economic states of
businesses which are in disharmony, where abused contractual workers with no benefits are hired
from agencies behind all these. Many businesses then will be affected once contractualization
will be on hold. (Aspillera, D., 2013).

The Labor Code of the Philippines prohibits the following acts of the principal employer:
in addition to his assigned functions, requiring the contractual employees to perform functions
which are currently being performed by the regular employees of the principal or of the
contractor or subcontractor; (b) requiring him to sign, as precondition for employment, an
antedated resignation letter, a blank payroll, a waiver of labor standards including minimum
wages and social or welfare benefits, or a quitclaim releasing the principal, contractor or
subcontractor from any liability as to payment of future claims; and (c) requiring him to sign a
contract fixing the period of employment to a term shorter than the term of the contract between
the principal and the contractor or subcontractor, unless the latter contract is divisible into phases
for which substantially different skills are required and this is made known to the employee at
the time of engagement (Labor Code, 1987). However, it is evident in status quo that there is
discrepancy between what the law states and its implementation. Non-regularized, contractual

14

employees are not even allowed to form unions and are not allowed to take part in collective
bargaining.

From the article written by Lopez on Philippine Star entitled Contractualization: Pros and
cons he stated that The capitalist nature of the outgoing regime has not given emphasis on this
supposed anti-poor policy of employment for reasons that may be both beneficial and otherwise
to labor matters and stakeholders. But then we also have to acknowledge that many investors
deem it wise to put their money in the Philippines because of the relatively cheaper labor cost,
which to an extent is brought about by contractualization. Although there are legal implications
of endo because a company cannot just practice labor contracting wittingly or unwittingly
without having in their company a roster of regular employees, it has nonetheless contributed a
lot to the total employment and national income by way of short-term employment opportunities.

Cancellation of endo would most likely post stringent requirements for the employers before new
regular employees may be hired. Hiring regular employees in favor of contractual employees, we
have to admit, entails a lot of costs perhaps more than double than what a contractual employee
will get sans benefits. Although this author would not favor a full implementation of
contractualization, but the thought of full cancellation of the same would accelerate the
unemployment statistics that we currently have.

Logic tells us that you cannot force the employers to give what they do not have. Much less force
them to hire regular employees to fill in job vacancies. To escape from the responsibility of
carrying the load and additional cost of hiring regular manpower, firms would rather overload
their current roster of regular employees with work in lieu of hiring regular employees. (2016)

15

Segal (1996) Short-term employment affected productivity of staff in the organization since a lot
of time and effort was used in training new employees as their turnover was high. The research
also noted that the very nature of temporary employment increases feelings of divided allegiance
on the part of temporary workers. This reduces their level of commitment and hence their
productivity. In addition, temporary workers worked on average fewer hours per week compared
to permanent ones because in most cases they were allocated less involving duties compared to
permanent workers.

16

METHODS

The four purposes of this chapter are to (1) describe the research methodology of this
study, (2) explain the sample selection, (3) describe the procedure that the researchers used in
designing the instrument and collecting the data along with the sources of data, and (4) provide
an explanation of the statistical procedures the researchers used in analyzing data.

Research Design
This study utilized the descriptive research method. Descriptive research design helps
provide answers to the questions of who, what, when, where, and how associated with a
particular research problem; a descriptive study cannot conclusively ascertain answers to why.
As widely accepted, the descriptive method of research is a fact-finding study that involves
adequate and accurate interpretation of findings. (Salkind, N. & Rasmussen, K. 2007)
Relatively, the method is appropriate to this study since it aims to seek the reasons of
businesses for engaging in contractual employment and perceived advantages and disadvantages
of abolishing contractual employment here in Bacolod City.
In this study, the researchers used direct-data gathering which is interview.

Participants of the Study

The participants are from different types of businesses and organizations that engage in
contractual employment based on the Philippine Statistics Authority 2014 survey of employment
regarding statistics on non-regular workers. The participants belong in the Top 20 result of the

17

survey. These include a Provincial Office for Administrative Services which is 27.4% of the total
population, A supermarket for Retail Trade which is 10.9%, Food Processors for the Agriculture
sector which is 7.6%, a fast food chain which represents Food Service activities which is 6.4%, a
salon for Professional Activities which is 1.7%, government owned entity representing Water
Supply which is .7%, and a Private Corporation for Electricity Supply which is .5%.
The respondents of this study were the only ones that agreed to participate and be
interviewed because of the sensitivity of the topic involved. With their request, this paper
maintains respondent confidentiality since the study involves laws and regulations that might put
the names of different personalities and businesses at risk.

The Research Instrument

Interviews were conducted to the respondents of the study.
A letter was provided for setting appointments with the business managers or employers.
Unstructured interview was used. The questions covered matters regarding the composition of
company profile and the perception of management towards contractual employment and the
arising issue of abolishing it. Specific objectives that were addressed include the differences
between contractual and regular employees and the reasons of businesses for engaging in
contractualization as well as its perceived advantages and disadvantages of abolishing
contractual employment in the business.

Data Gathering Procedure

The primary data needed for this study were directly gathered through interview with the
business managers and Human Resource Department heads of business engaged in contractual

18

employment within Bacolod City. Also, views and opinions of people knowledgeable for the
matter such as regular and contractual employees were gathered in the same procedure. The main
objective of this is to collect information regarding the reasons of these entities in having
contractual workers as their employees and the possible effects to the operations of their business
if contractual employment is abolished.
A series of steps were conducted in gathering the data needed for this study. The group
based the chosen companies from the Philippine Statistics Authority 2014 survey of employment
regarding statistics on non-regular workers. These types of businesses are the ones most known
as contractual employers. A letter was given to each business for a schedule of interview with the
managers or human resource department heads in the city. During the interview, an interview
schedule served as guide for the interviewer to stimulate the conversation; however, the
interviewee freely expressed his or her opinions regarding the topic.
The results of the interviews served as answers to some of the objectives of the study
which are: (1) the company profile of entities who are engaging in contractual employment, (2)
the reasons of businesses for engaging in contractual employment, (3) the managements
perceived advantages of abolishing contractual employment, and (4) the managements
perceived disadvantages of abolishing contractual employment.
The procedure also included gathering opinions of several employees of the chosen
business participants. Interviews were given at the respondents own convenience in order to
know their stand as the ones experiencing or not benefiting from incentives that must be
provided by the companies based on the labor code of the Philippines.
The proponents gathered information coming from previous studies, viewpoints of other
authors that are relevant to this research, publications in different sources such as online articles,

19

magazines, newspapers, and books regarding the contractual employment and the different
effects of the implementation of labor code series of 2011 to the operations of business entities.
These secondary data were used to support results. These were also added in the first chapter of
this paper that will support the succeeding parts and procedures of this study.
Thematic Analysis
In this research, thematic analysis was used by the researchers to analyze and make
judgements based on the observed groups and the gathered results.
Thematic analysis (TA) is a widely-used qualitative data analysis method. It is one of a
cluster of methods that focus on identifying patterned meaning across a dataset. The method has
been widely used across the social, behavioural and more applied (clinical, health, education,
etc.) sciences. (The University of Auckland., n.d).
The results that were produced after the collection and analysis of the data helped the
researchers in the organization and development of the data.
This theme captured participants perceptions about the effects of the arising issue of
abolishing contractualization to the business. Thematic analysis suit best the study because the
information gathered is qualitative data.

20

RESULTS AND DISCUSSIONS

This chapter will present the results gathered after conducting the interviews on the
effects of abolishing contractual employment on the financial aspects of the business.
Company Profile
Company A is one of the 119 electric cooperatives in the Philippines. It was incorporated
on February 24, 1975 in Bacolod City, in the Province of Negros Occidental. At this time,
Company As generating units were hard-pressed to keep up with the load demand of its
coverage area. The power barge from the National Power Corporation on June 16, 1981 was
stationed along Bacolod's Reclamation Area Project and augmented Company A's electric power
supply. The passage of R.A. 9136, otherwise known as the EPIRA 2001 or the Electric Power
Industry Reform Act, has restructured the power situation in the country. This act has, among
others, allowed the participation of the Independent Power Producers, the privatization of the
National Power Corporation, and required the cooperatives and private distribution utilities to
unbundle their power rates. As of January 2016, there are 385 employees in the company of
which 308 (80%) are regular employees and 77 (20%) are contractual employees.
Company B was created by virtue of PD 198 and was implemented by virtue of City
Council Resolution #4460 Series of 1973. Company B became a Government-Owned and
Controlled Corporation (GOCC), by virtue of a Supreme Court decision. Currently, there is an
estimate of 400 employees in the company of which 260 (65%) are regular employees and 140
(35%) are contractual employees.

21

Company C is a chain of neighborhood grocery stores under the Food Retail Group. The
mid-size food retail store has been on an expansion mode amid the competition from old and new
players in the retail business. In less than two decades since it opened its first store in Riverbanks,
Marikina in 1998, Company C has expanded to 130 stores nationwide as of Sept. 30, 2015. These
company stores are located outside a parent mall to bring the shopping experience closer to
where shoppers live and work. Company C Markets tagline is At your Service! As it takes pride
in excellent customer service and in providing the shoppers daily needs. Currently, there is an
estimate of 500 employees in the company of which 200 (40%) are regular employees and 300
(60%) are contractual employees.
Company D offers world-class hair dressing, fueled by Filipino passion. With the vision
of bringing Fine European hairdressing to the Philippines, the CEO and the Company D's brand
has made a name for itself by offering a wide range of hair and beauty services to a wide range
of customers. It is a name that has been admired and followed by many Filipinos since its first
salon opened in 1989. It is now the biggest chain of salons in the Philippines, with over 200
branches all over the country. Currently, there is an estimate of 20 employees in the company of
which 10 (50%) are regular employees and 10 (50%) are contractual employees.
Company E serves over a million pizzas a day in more than 15,600 restaurants in 90
countries making it the No.1 pizza brand in the world. In the Philippines, Company E began in
1984. It is now the country's most popular pizza chain serving Metro Manila and surrounding
provinces, as well as Visayas and Mindanao with its Dine-In Restaurants, Delivery Units and
Express Counters. Currently, there is an estimate of 30 employees in the company of which 17
(55%) are regular employees and 13 (45%) are contractual employees.

22

Company F is the seat of the provincial government of Negros Occidental. In July 2001,
rehabilitation of the Company F was initiated and it was inaugurated on 23 June 2004. On 19
July 2004, the National Historical Commission of the Philippines under Resolution No. 9,
declared the Company F as a National Historical Landmark. Currently, there is an estimate of
500 employees in the company of which 287 (57.4%) are regular employees and 213 (42.6%) are
contractual employees.
Company G. Currently, there is an estimate of 150 employees in the company of which
94 (62.67%) are regular employees and 56 (37.33%) are contractual employees.

Reasons of Businesses for Engaging in Contractual Employment

The participants are engaging in contractual employment in order to lessen costs
especially when it comes to salary expenses. However, 4 out of 7 of the interviewees answered
that one of the reasons they engage in contractualization is that, employees tend to perform less
when they become regular in the company because they are relying on the fact that they cannot
easily be fired anymore. While, 3 out of 7 of the participants answered that it is flexible to hire
employees per project because if there is launching of a major project or preparing for a seasonal
change in business, hiring contractors allows them to add employees to their workforce to satisfy
specific needs. Furthermore, if there is an unexpected downturn in business, the employers are
not obligated to renew the contract once it expires and utilizing contractors effectively allows the
business to remain lean when budgets are of concern.

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Differences between Contractual and Regular Employees

The most common difference between contractual and regular employees are the benefits
they are receiving. Contractual employee benefits do not level with regular employee benefits.
First, contractual employees, being new to the job, do not perform as well as regular employees,
although this is not always the case. They lack the experience which makes for their lower pay
and fewer benefits than have regular employees. Contractual employees do not have
contributions for SSS, PAG-IBIG, and PhilHealth. Regular employees have vacation leave as
well as sick leave which allow them not to work for a several number of days but still earning a
salary. On the other hand, contractual employees are in no work, no pay basis.
Advantages of Abolishing Contractual Employment
For the employers, one advantage of abolishing contractual employment is that,
employees would be more familiar or experienced when it comes to their jobs and would be able
to produce better quality of products and service for the consumers. This would let the business
gain the loyalty of the employees and the clients. Managers believe that regular employees tend
to have better knowledge of the jobs theyre doing compared to the contractual employees.
Disadvantages of Abolishing Contractual Employment
The disadvantages of abolishing contractual employment includes an increase in the costs
of the company since the employers will have to add benefits to the salary expenses that they
will be paying to their employees. If contractual employees would be regular employees of the

24

company, there would be higher risk of absenteeism and tardiness. Some employees might abuse
the vacation and sick leaves given to them that can compromise their work and may cause loss
for the company. Another disadvantage is the possibility of laying off employees because of the
incapability of the employers to pay them the proper amount of salary they should gain based on
law. These employees may include those people who have the best skills when it comes to their
jobs that greatly contribute to the success and profitability of the business.

25

CONCLUSIONS

This chapter covers the conclusions drawn from the results. It also discusses the
recommendations of the proponents based on the results of the study conducted.
To a great extent, it can be concluded that the study achieved its objectives as outlined in
the Introduction. It is noted that most of the participants have greater percentage of regular
compared to contractual employees composing their workforce based on the business profile
given by the company.
The study concludes that the main reason of businesses for engaging in contractual
employment is to lessen expenses. Also, entities hire contractual employees for the reason that
regular employees tend to perform less and are abusing the benefits they are receiving. The main
difference between regular and contractual employees is the benefits they receive depending on
the companys standards.
Abolishing contractual employment would be beneficial for the employers because
temporary employees would be more aware and knowledgeable of their jobs that would
contribute to the success of the company. However, regularization of these employees would
increase costs of the company in terms of wages and may also cause tardiness and absenteeism.
The study also concludes that in the employers perspectives, the disadvantages outweigh
the advantages of abolishing contractual employment. Therefore, this would not totally be

26

beneficial to the businesses because it would either decrease their income due to the increase in
salary expenses or would cause them to lose potential employees that contribute greater to the
success of the company.
Lastly, the study concludes that in order for businesses to gain a higher income, they
choose to compromise the rights of the employees and somehow disregard the laws.
Based on these conclusions, the researchers would recommend that employers should be
aware of the different laws especially when it comes to the rights of the employees. They must
provide proper compensations based on the labor code. Also, they should think of other strategies
to increase their income instead of cutting off the benefits of the workers just to reduce costs.
On the other hand, contractual employees must be aware of their rights and the different
compensation policies of the companies they either plan to work for or currently involved in.
They also have to prove their worth to their employers in order to gain higher positions and
receive higher salary but at the same time maintain proper working behavior.
Finally, the proponents recommend that future researchers of this related study be fully
aware of the different situations involved in their chosen topic including laws and regulations. It
would also be more beneficial if they include more respondents and focus on the financial aspect
that shows the specific effects of abolishing contractual employment to the income of the
businesses.

27

APPENDICES

28

Interview Schedule
1. What is your business profile?
2. How many employees does your company/company branch have?
3. What percentage of the total employees are regular?
4. What percentage of the total employees are contractual?
5. What made you decide to practice contractual labor?
6. How is contractual employment beneficial to your business?
7. Do the contractual employees have benefits? If so, what are these benefits?
8. What are the difference of the contractual employees to the full-time employees?
9. If the contractual employment continues, what are the positive effects to your company?
10. What would be the positive effects of abolishing contractual employment to your
company?
11. What would be the negative effects of abolishing contractual employment to your
company?

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