Top 3 Ways the End Of “Endo” will Affect Businesses in the Philippines

It’s a salaryman’s nightmare to wake up one morning without a job. This is purportedly what is happening all around due to the persistence of the dreaded “endo” (end of contract) in the Philippine labor scene. But the effect of endo culture is not exclusive to the wage earners.

Endo — whether it is continued or abolished — will make an impact in the way businesses are run in the country.

Even before he was elected, President Rodrigo Duterte had already pledged his sword against endo. In fact, he had threatened that “endo business owners” will face the same fate that drug dealers are currently suffering.

Even if there is still endo in 2016, the government is targeting the abolishment of endo by 2017. The Department of Labor and Employment has even taken the first step, launching an order that prevents the application of new third-party service providers. The latter are notorious for their merciless practice of contractual hiring.

This stance of the Duterte administration has stirred a hornet’s nest of talk, with Senator Recto calling out for an end in government endo practice, too. Businessmen have also pledged to back this drive, so long as it does not affect legitimate business practices.

But what will likely happen when endo ends? Here is a quick overview.

Endo is primarily a loophole exploited by employers looking for a low-cost workforce. This is a part of why the Philippines is such an attractive job market. According to estimates, about 30% of the Philippine workforce subscribes to contract labor, and this will be affected adversely. When the country falls out of favor in terms of its labor force, the economy will take a hit — and this will strike right back at the businesses who have lost the ability for short-term hiring.

This said, most of the major industry segments will remain unaffected by the proposed endo law. The most heavily impacted will be the Construction segment, 71% of which are contractual workers.

According to PALSCON President Rhoda Caliwara, outlawing the practice of contractualization can throw about a million workers out of a job. Because businesses cannot hire them contractually, this will also cause a drought for companies as the latter will lose an option to hire workers for the short term.

This stands in stark contrast to the opinions of lawmakers such as Representative Emmeline Aglipay-Villar, who sees the abolishment of endo as a step towards widespread job security.

According to Caliwara, legitimate service contractors do not really deprive its workers of the proper privileges. It is common perception that “endo employers” do not retain the proper employer-employee relationships, throwing the worker out after six months just to avoid giving benefits. Caliwara stated that this belief is false, and noted that the act of contractualization helps lots of workers earn a living — even for a limited time.

For her part, Aglipay-Villar said that contractualization is a violation of the right to security of tenure. She argues that if a certain job is central to the processes of the business — such as the sales person post in department stores — the lawmaker asserts that it should be a regular post. A proposed “endo law” is aimed at fixing the Labor Code loopholes that allowed companies to take advantage of endo.

There’s no denying that contractualization is a means for companies to get people when they need it — and to dispose of them when they see fit. This has become an “accepted” reality for the most part that some companies have built their business processes around it.

Going back to the salesperson example, a company may already have a concrete set of processes meant to “replenish” the ‘endo’-ed personnel.

Thus, these businesses can be affected when endo is removed. If the companies are not flexible enough, they will end up removing the additional hiring and training teams they instituted for the six-month hiring cycle. There will also be reorganization in terms of providing the needed benefits for newly-regularized employees.

Endo has had such a deep influence in the Philippine labor scene that there will be rippling changes when the endo law is enacted. Right now several labor groups are bringing forth proposals meant to criminalize businesses who hire on a contractual basis. These submissions still have to be properly reviewed to bring to light all the pros and cons.

And what a delicate balancing act this will be. While many businesses will be shaken up by the removal of endo in the Philippines, many workers will see the measure as heaven-sent. Because they are already regular employees after their first six months, they can snap back from being underpaid and being withheld from their benefits.

The general public’s purchasing power will also increase, because workers will be eligible to receive incentives. Also, contractual employees tend to have a hard time getting loans or credit from the bank since they have no stable source of income. This is also bound to change.

There are, of course, positive things that businesses stand to gain when endo has been eradicated. For one, there will no longer be as much resources dedicated to training new batches of employees. These funds can be diverted to something else. By giving benefits, businesses can be assured of a more productive workforce.

A person who has job security will be more dedicated to success than someone who dreads the day the contract ends. Incentives can also be used to drive productivity and motivation, bringing forth a more active workforce. This can upturn any dent in the labor force made by the initial implementation of the measure.

At the pace that the Duterte administration is handling its pet projects, we can be sure to hear more news about this in the coming weeks. There will be birth pains when the change finally comes, but hopefully we can all look forward to a brighter future for our workforce and our businesses alike.

“Endo” refers to the practice of ending employment before regularization to avoid granting benefits, which is prohibited under Philippine labor laws. Understand its impact in our guide on the end of endo.