Monday, June 27, 2011

Another madcap idea

This was my column on the date indicated above. This post is antedated.

On the heels of a human resources summit of HR professionals in Asia, I wrote in this space last week about my observations about the industrial relations situation in Singapore, venue of the summit. I talked about how enviable the situation in Singapore was —how the Singaporeans have a massive surplus of jobs, how even senior citizens could easily find employment there, and how the whole country seemed intent on creating more and more opportunities for growth, with everyone—government, business and industry, the labor sector, and the general population—all firmly committed to making things work. Singapore remains on a massive expansion mode driven primarily by a national vision that is fully committed to effectively harness the power of human capital.

Three days upon my return to beloved Philippines, I received news that sent shivers down my spine: Just before the House of Representatives went into recess early this month, the Committee on Labor and Employment submitted for plenary vote a consolidated bill purportedly designed to protect the security of tenure of employees which, if passed, would send Philippine competitiveness on its knees.

The proposed measure validates what many experts have long concluded about the state of industrial relations in this country: Hopelessly mired in destructive partisan politics. We seem intent on sabotaging whatever gains we’ve made in the area of competitiveness and enhancing employment and employability by insisting on short-term populist measures.

The proposed measure called House Bill 4853 not only retained all the onerous provisions of a previous draft measure (HB 303)—which, ironically enough, was already presumed to have been “shelved” after a series consultations between business representatives and a number of legislators—it proposes even more alarming provisions that would nip in the bud any hope of business expansion particularly by small and medium enterprises.

The business sector was already dealt a major whammy recently when government caved in to the demand of the labor sector for an increase in minimum wages. Legislating minimum wages is a madcap idea that curtails employability; as it is, we already have one of the highest minimum wages in the region, making it prohibitive for foreign investors to expand business operations in the country let alone bring investments into the country. HB 4853, known as the Security of Tenure Bill, is an even more insidious idea.

If, heaven forbid, the measure gets passed and becomes a law, the number of subcontracted employees a business can have will be limited to only 20 percent of its total workforce.

In addition, the bill proposes to make it a violation of the law if the company’s total number of probationary employees exceeds 30 percent of its total workforce. I know. It is incomprehensible.

These are just two of the more contentious provisions of the bill. In effect, our legislators have just sent word that expansion of business and creating more employment will become prohibitive and almost illegal in this country.

The 20-percent cap on subcontracted employees does not exclude security, messengerial, and janitorial services. Businesses that are retail-based such as banks, pawnshops, and those small franchise businesses (think Master Siomai) that you see in malls and busy intersections will be hit the hardest. Around 50 percent of the total manpower complement of banks and pawnshops and other similar businesses in this country are comprised of security guards; how are these companies supposed to operate without adequate security?

Our legislators insist that these employees should be hired as regular employees. But if companies are required to hire security guards as regular employees under the guise of providing security of tenure, then God help this country because certain rich businessmen/politicians with controlling stakes in major manufacturing companies would have instant armed private armies!

And think about the implication of the proposed 30-percent cap on probationary employees to the thousands of franchised businesses that employ two to three employees per outlet. If a stand-alone snack bar requires three employees to operate, the 30-percent cap would mean they could only hire one additional person every six months. This would mean writing finis to any plans of expansion! It is this kind of shortsightedness that strangles opportunities to create more employment.

It must be stressed, though, that the intent of the proposed bill is noble. Protecting the welfare of employees is a responsibility that everyone in this country must share. Security of tenure must be ensured. But there are ways to do this without necessarily endangering the viability of business. There are win-win solutions that can be explored.

We’re just talking about the impractical applications of the proposed bill. We’re not yet talking about the larger issues that the bill actually tackles, which is outsourcing. We’re benefitting immensely from the outsourcing phenomenon with many jobs in first world countries being brought to the Philippines. The business process outsourcing sector is experiencing a major boom; recent projections indicate that if this sunrise industry is carefully nurtured and allowed to flourish, the revenues that will be generated will overtake the volume of remittances of overseas Filipino workers in five years.

Unfortunately, outsourcing is being given a bad rap by certain sectors because of ideological reasons. It is unfortunate that certain sectors are reducing the whole issue into a Goliath versus David fight. It is a tragedy that ideological forces have turned the issue into an either/or proposition. This is not about whose interest must prevail because deliberately putting one party at a disadvantage in order to favor the other party results in a no-win situation. The provisions of HB 4853, simply put, will stifle employment and slow down expansion at a time when far too many of our countrymen need jobs. In the end, everyone loses.

The issue really is employment because if there are more than enough jobs in this country and people can afford to pick one job over another, we will not be even talking about the need for security of tenure. As in the case of Singapore, when people feel disenchanted with their employers, they simply leave and transfer jobs because there are more than enough to choose from. Such a setting forces employers to come up with better mechanisms to retain key talents and these programs are far more effective than any law on security of tenure. Besides, security of tenure should really be a joint responsibility of government and the business sector.

For the moment though, the workable solution is to produce more employment opportunities and to nurture an industrial relations ecosystem that creates jobs and more jobs. In such a scenario, HB 4853 would be deemed completely irrelevant.

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