Industrial Relations Profile of Philippine Labor Environment

This study seeks to provide a general and grassroots perspective on relevant labor and compliance issues typical of Philippine industries. Some focus is also given to export processing zones and freeports as these are major concentrated areas of employment generation. The hypothesis is that export zones may have inherent labor compliance issues because of the presence of labor-intensive environments and the high demand for production and export deliverables. Major employment sectors considered include: (1) Garments, (2) Electronics, (3) Info. Tech, (4) Tourism and (5) Other Manufacturing operations. While 90% of Philippine industries are classified as Micro, Small and Medium Enterprises, these 5 sectors are generally considered as the top employing industries, a scenario reflective of both metropolitan and countryside areas.

Manpower Profile of Clark Freeport Zone (A Major Philippine Ecozone)Gender Employment Status

Male 50.48% Regular Probationary/Trainee Contractual/TemporaryFemale 49.52% 50.06% 15.37% 34.57%Source: Clark Freeport Manpower Updates 2008-2013

Although more than 50% of workers in CFZ are regular, more than one third of the workforce is composed of non-regular workers. These include casual, project or temporary workers as well as contractual workers employed by manpower agencies, contractors and sub-contractors. These also contribute greatly to employee turnover in ecozones. The average number of NEW HIRES per year is over 10,000 workers but the average net net increase in total employment is only about 4,000 warm bodies per year.

Analysis

It is important ensure the legality and validity of contracting and subcontracting activities as this is an ever expanding sector in the search for flexible employment mechanisms. Although such activities are regulated by DOLE D.O. 18-2002, care should be taken in examining and choosing a contractor or manpower agency, making sure that such agencies are duly registered with DOLE and with a good track record.

Many employee complaints arise out of contractual employment, although such cases are within the direct accountability of the employer (contractor) the principal may be deemed jointly and severally liable with the contractor in case of violation of labor standards and is deemed solely liable if the contractor is proven to be merely an agent of the principal or engaging in labor only contracting which is prohibited by law.

Company Best Practices

1. Follow all applicable Labor Code regulations on Regular, Probationary and Casual employment2. Practice caution in employing the services of independent Contractors and Subcontractors3. Report all existing contractors and agencies for proper monitoring4. Report all employment regularly for proper manpower monitoring

Proposed Labor and Employment Monitoring Services

1. Accreditation of Contractors and Manpower Agencies and Other Service Providers2. Monthly Manpower Update3. Manpower Projections Survey4. Placement Assistance Services

LABOR STANDARDS AWARENESS AND COMPLIANCE

General Labor Standards Violations (covered by Book III of the Philippine Labor Code) based on CFZ findings are most evident in Small-Medium Manufacturing companies (Industrial-Other Manufacturing) which is the consistently the most frequent sources of labor standards non-compliance. Service-oriented companies such as restaurants and shops also typically have some form of non-compliance.

For Small-Medium Manufacturing firms, this is mainly due to the smaller scope of operations, having an average of 50-100 employees in a labor intensive industry, but lacking the appropriate Administrative staffing to ensure proper compliance to applicable labor standards.

For Service-oriented companies, non-compliance is typically in the area of hours and wages, where common violations are on minimum wage compliance, overtime and premium pay, etc. and delinquencies or non-membership under in SSS and HDMF (Pag-IBIG Fund).

This is likewise due to the relatively small scope of operations and often, the lack of dedicated and capable staff to handle HR affairs and keep updated with new labor legislation.

As to nature of non-compliance, violations on Wages, Statutory Monetary Benefits (SMB), Social Welfare Benefits (SWB) and Minimum Wage are the most common. Minor SMB violations occur in relatively smaller and newer firms who may not be fully aware of monitored labor standards. Particularly in the last couple of years where there have been new additions in non-working holidays, where new companies do not become immediately aware.

The almost bi-annual Regional wage increases and/or increase in Cost of Living Allowance (COLA) mandated by Regional Wage Orders may have also served as a major source of non-compliance as many companies, including the larger ones, were careful in immediately implementing the new wage orders before the release of the Implementing Guidelines.

Company Best Practices 1. Be aware of all applicable Labor Standards and new Labor legislations and comply religiously2. Employ capable and dedicated staff to handle Wages, Payroll and Benefits administration3. Ensure proper education or orientation of employees on applicable Conditions of Employment and how these are being made available and administered by the company4. Establish an employee counseling system where workers may inquire about computation of benefits5. Make available, support services for SSS, ECC & HDMF membership and benefit processing6. Participate in Compensation & Benefits surveys to acquire industry benchmarks7. Regularly consult labor and HR practitioners and participate in trainings in Labor standards

Proposed Compliance Intervention

1. Industrial Relations Consultation Visit2. Labor Standards Assistance Audit3. Labor Education Seminar4. Walk-in / Phone-in Labor Advisory5. Compensation & Benefits Survey

GRIEVANCE MANAGEMENT

Employee complaints on Security of Tenure covering topics such as Non-regularization, Dismissal without due process, Lay-off are consistently in the Top 3 areas of complaints in the past 10 years.

Complaints on Statutory Monetary Benefits which covers monetary premiums and mandated benefits from overtime pay, holiday premium, night differential, 13th month pay and the like are also take a consistent spot on the Top 3 areas of complaints.

Sources of Employee Grievance by Industry

A review of employee complaints would show 3 sectors consistently topping the list (a) Garments, (b) Electronics and c) Other Manufacturing. This is mainly due to the sheer size of these companies’ workforce. Typically, 20% of the companies in Philippine Economic Zones would already represent 80% of the Zone’s total workforce.

It is also not surprising that these sectors are the most labor intensive, requiring work with physical effort, working in 24 hour shifts and having fluctuations in workforce requirements. These sectors are also the most likely to retrench or resort to temporary lay-off and contractual employment.

Analysis

The number of documented complaints has been increasing year by year which could imply two things. (1) More and more employees are being made aware the government’s mediation services, establishing it as the “preferred” third party inter-mediator with regard to grievances and disputes or (2) More and more companies are causing their employees to seek intervention from external sources rather than settle grievances at the plant level.

Similarly, the continuing increase in the number of “affected” employees is also increasing implying also two possibilities. (1) More employees are filing individual complaints or (2) Grievances take the form of systemic problems affecting not only individual or small groups of employees, but several and at times, so broad in scope as to affect the entire workforce of a company.

Whatever the case may be, it should be the mandate of the ecozone’s administrative authority to effectively act and mediate on complaints and grievances so as to facilitate plant-level mediation without cause for legal action on the part of either labor or management. The private and public sector alike should seek to facilitate genuine communication and conciliation between both parties in the interest of fairness, equity and industrial peace.

Security of Tenure

Grievances on Security of Tenure are most prevalent aside from complaints on basic labor standards. Such concerns on alleged illegal dismissal and lay-off are common which implies that some companies are not fully aware or the right to Due Process.

Such concerns also arise from the absence or inefficiency or inconsistency of a company’s disciplinary management system or performance management system. Thus employees tend to question the appropriateness of disciplinary actions and procedures. Management should ensure that its code of discipline is clear, understood by all and applied consistently across all situations.

Complaints on Statutory Monetary Benefits are consistent with the findings on Labor Standards where such non-compliances are apparent especially in small-medium industrial firms and service industries.

Majority of complaints on Security of Tenure, however emanate from Garments firms. This could be attributed to regular fluctuations in production as the garments industry typically experiences peaks and lows in production and is largely seasonal in nature. This causes companies to inevitably lay off employees (regardless of status) during low season and recall during peak season. Such complaints on SOT from Garments firms also emanate from heavy contractualization, also brought about by lack of skilled manpower and immediate sources of such.

Company Best Practices

1. Establish an organized and acceptable and non-discriminatory grievance mechanism to settle issues amicably at the plant-level2. Establish a genuine open-door policy to avoid filtration of concerns and issues at various management levels3. Practice responsible contractual / seasonal employment while respecting rights to SOT4. Plan production schedules efficiently so as to maximize manpower thus avoiding prolonged overtime work5. Clarify selection policies and criteria during times of necessary lay-off or even retrenchment6. Ensure due process in disciplinary management and on dismissal for just and authorized causes7. Establish and communicate a clear, fully understood and impartial Code of Conduct and Discipline with recognized procedures and applications

Proposed Labor Mediation and Conciliation Programs

1. Industrial Relations Consultation Visits2. Grievance Desk and Complaints Documentation3. Preventive Mediation / Conciliation-Mediation4. Walk in / Phone-in IR/HR Advisory5. Consultation Services in Disciplinary Management

FREEDOM OF ASSOCIATION AND SELF ORGANIZATION

Issues Arising Out of Organized Companies by IndustryIndustry Category Common IssuesGarments 1. Wages and Statutory Monetary Benefits

(Minimum Wage, Piece-Rate System, 13th Month pay)2. Security of Tenure(Retrenchment, Temporary Lay-off, Separation Benefits, Illegal Dismissal, Fear of Runaway Shop)3. Management Policies & Supervision(Inconsistent application, Inter-personal relations)4. Communication and Dialogue(Lack of access to Top Mgt.)

Other Manufacturing 1. Security of Tenure (Separation Benefits, Fear of Runaway Shop)2. Performance Management

Commercial 1. Security of Tenure(Non-regularization, Separation Benefits, Fear of closure)

Other 1. Compensation and Benefits

Analysis

Central Luzon Region in Northern Philippines has experienced relative industrial peace in the last 5 years, achieving zero strikes during the last 2-3 years. Although there is no single conclusive causal relationship between labor organization and company closure, about half of companies that were organized were observed to have closed down. It could neither be said that this was the cause or effect of organization because closures are also the outcome of several varying reasons from economic or financial difficulties such as losses or lack of business, to industrial downfalls and of course, management prerogative.

Looking at historical trends shows some common denominators among current or previously organized firms.

(1) Most organized companies belong to the Garments sector which is characterized by high and largely seasonal employment (whether regular or contractual), labor intensive working conditions, and high incidence of minimum wage earners.

(2) Security of Tenure is a recurring area of grievance which is indicative of the relative difficulty to administer effective due process in such large scale industries where the volume of disciplinary cases as well as low efficiency performance is high and frequent. These pose ever-present challenges to HR/IR practitioners who are constantly balancing high performance and positive employee relations.

Further, the fact that those companies belonging to the Garments and Manufacturing sector dominate both the organized sector and the sector with the highest recorded grievances suggests that the employees of these companies are also those most prone to seek third-party assistance or support to seek a redress of grievances.

It is thus paramount to institutionalize genuine employee relations mechanisms aimed at developing trust and openness with management as well as non-confrontational approaches to labor dispute management. Such systems should cover areas such as, but not limited to, employer-employee communication, employee welfare, worker productivity, job security and career advancement, social accountability and general work-life balance.

Company Best Practices

1. Establishment of dedicated Employee relations unit2. Conduct of regular employee dialogues with top management3. Establish acceptable and genuine modes of communication and information transfer4. Encourage Morale, Welfare and Recreation activities5. Encourage and implement employee participation and involvement mechanisms6. Train in-house trainors and develop in-house programs for productivity, team-building and work values enhancement7. Develop and apply genuine performance management systems for merit and promotions 8. Foster a spirit of volunteerism, community awareness and social responsibility9. Inculcate a distinct corporate culture which fosters sincere loyalty, excellence and belongingness

Proposed Industrial Peace Strategies

1. Orientation on Employer-Employee Cooperation2. Industrial Cooperation Committee Program3. Facilitation of corporate programs with partner Institutions4. Training and development facilitation programs through Clark Polytechnic5. Training Needs Surveys6. Support for Industry / Sector Associations7. Advocacy programs on Corporate Social Responsibility8. Industry assessment support for Investors awards and Philippine Quality awards criteria

GENERAL SUMMARY

The achievement of positive employer-employee relations towards a cooperative partnership is founded on a delicate balance between employee welfare and business competitiveness. The two complement and strengthen each other. For any company, there is a natural evolution from:

(1) A most basic understanding and seeking to comply with labor legislation and labor standards to;(2) a strengthening of Human Resource management must consider control aspects in the workplace and establish a positive mechanism for disciplinary management and formulate a fair and acceptable corporate code of conduct to;(3) the installation a non-adversarial complaints and grievance mechanism, paving the way for plant level mediation and settlement towards;

(4) the development of an employer-employee mechanism fostering genuine dialogue, participation and involvement and discussing mutual concerns of employee welfare and productivity and finally;(5) towards achieving good corporate citizenship advocating excellence in business and human relations management while extending to the community and achieving a work-life balance for the employee, sustainable development for the company and social upliftment for the community and society as a whole.

This is the challenge for each business organization and for each and every employee, to contribute and participate in a societal re-engineering for personal, industrial and community development.

CONCLUSIONS AND RECOMMENDATIONS

There is a primordial need to continually enhance and empower the practice of labor-management and industrial relations in Philippine Economic Zones and Export Zones. Such areas must have a formal and institutionalized labor and industrial relations center which serves as the clearing house for any and all labor concerns and provide services necessary for dispute mediation and settlement, proactive labor standards monitoring and compliance support and very importantly, preventive mediation and IR/HR training interventions.

There is a continuing need to synergize these systems with a functional MULTI-PARTITE INDUSTRIAL RELATIONS COUNCIL composed of both labor and management representatives, duly supported by relevant government agencies and even by the local government.

Finally, labor and IR programs should focus on long term work-life balance, employees and family welfare as well as corporate social responsibility as a means of achieving productivity and competitiveness in a global industrial setting.

Human capital management and development should always be regarded as the primary tool for business success and sustainability. In the end, Industrial Relations is not merely the responsibility of government, or or the labor federations, but a shared and accepted responsibility of all stakeholders.

RESOURCE PERSONS:

ERVYN J.C. RIVERAHead, Clark Industrial Relations Unit (Ret.)Executive Director, Clark Human Resources CouncilVice Chairman, Pampanga Tripartite Industrial Peace Council

ORGANIZATIONS:

Clark Human Resources Council (CHRC)Philippine Exporters Foundation Region IIIClark Garments Manufacturers Association Pampanga (CGMAPI)Clark Electronics & Semiconductor Industries Association (CESIA)Metro Clark ICT Council (MCICTC)Pampanga Tripartite Industrial Peace Council (PTIPC)

(4) the development of an employer-employee mechanism fostering genuine dialogue, participation and involvement and discussing mutual concerns of employee welfare and productivity and finally;(5) towards achieving good corporate citizenship advocating excellence in business and human relations management while extending to the community and achieving a work-life balance for the employee, sustainable development for the company and social upliftment for the community and society as a whole.

This is the challenge for each business organization and for each and every employee, to contribute and participate in a societal re-engineering for personal, industrial and community development.

CONCLUSIONS AND RECOMMENDATIONS

There is a primordial need to continually enhance and empower the practice of labor-management and industrial relations in Philippine Economic Zones and Export Zones. Such areas must have a formal and institutionalized labor and industrial relations center which serves as the clearing house for any and all labor concerns and provide services necessary for dispute mediation and settlement, proactive labor standards monitoring and compliance support and very importantly, preventive mediation and IR/HR training interventions.

There is a continuing need to synergize these systems with a functional MULTI-PARTITE INDUSTRIAL RELATIONS COUNCIL composed of both labor and management representatives, duly supported by relevant government agencies and even by the local government.

Finally, labor and IR programs should focus on long term work-life balance, employees and family welfare as well as corporate social responsibility as a means of achieving productivity and competitiveness in a global industrial setting.

Human capital management and development should always be regarded as the primary tool for business success and sustainability. In the end, Industrial Relations is not merely the responsibility of government, or or the labor federations, but a shared and accepted responsibility of all stakeholders.

RESOURCE PERSONS:

ERVYN J.C. RIVERAHead, Clark Industrial Relations Unit (Ret.)Executive Director, Clark Human Resources CouncilVice Chairman, Pampanga Tripartite Industrial Peace Council

ORGANIZATIONS:

Clark Human Resources Council (CHRC)Philippine Exporters Foundation Region IIIClark Garments Manufacturers Association Pampanga (CGMAPI)Clark Electronics & Semiconductor Industries Association (CESIA)Metro Clark ICT Council (MCICTC)Pampanga Tripartite Industrial Peace Council (PTIPC)