Practice Area Articles

Philippines

January 16, 2023

Rafael E. Khan

KEY DEVELOPMENTS FOR 2023

Economic recovery

Employers are facing renewed and intense calls for wage increases in light of persistent high inflation. The Philippines sets a statutory minimum wage on a regional basis – the last round of which was in the first half of 2022 – and any increases to that minimum wage typically results in upward adjustments to entry and low-level positions across-the-board.

Employers need to be prepared to make adjustments to wage and non-wage benefits to remain competitive.

Employers that are trying to avoid an inflationary disruption to their programmed salary increases, may want to explore granting non-cash improvements in areas like transportation assistance or medical benefits, or one-time grants such as a cost-of-living allowance or financial assistance, to tide employees over until the inflation rate stabilizes.

Security of tenure

A security of tenure law that was intended to place additional restrictions on outsourcing was vetoed by the President in 2019, but the law’s sponsors have promised to re-file it this congressional term.

The law’s most significant limitation would have been to prohibit the outsourcing of work that is “directly related to the principal business” of the employer, which under current laws can be done on a seasonal, time-bound or project basis. Such a prohibition would compel employers to hire workers performing this kind of work, rather than engaging them through a third party contractor.

Alternative working arrangements

Private sector work-from-home arrangements due to the COVID-19 pandemic were popular and relatively widespread for white-collar office workers, many of whom now want to maintain some semblance of a hybrid work schedule. Even the government backtracked on a rule requiring BPO workers to resume onsite work - a condition for tax incentives tied to office locations in special economic zones.

Philippine employment law recognizes that acts constituting “constructive dismissal” or a “diminution of benefits” are illegal i.e., situations where an employer unilaterally alters employment terms to the worker’s detriment. Therefore it will be helpful for employers to establish clarity for onsite, remote or hybrid work, particularly with respect to the effect of these arrangements on job descriptions, performance evaluations and working conditions.

With thanks to Rafael E. Khan of Siguion Reyna, Montecillo & Ongsiako for his invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2022

Vaccine mandates and return-to-work orders

Many medium and large private employers have shouldered costs for COVID-19 vaccinations for their employees. As many workplaces reach full voluntary coverage, there are expectations that vaccinated employees will resume physical attendance at work; however, given the varying progress of vaccination efforts in the general population, and continuing spikes in COVID-19 transmission caused by new variants, many workers remain hesitant to return to full-time physical attendance at work.

No specific Government guidance on compelling vaccinated workers to return to work, nor sanctions for refusal to return to work (including termination of employment), will be upheld by the labor courts. Enabling legislation will be needed for private employers to compel workers to get vaccinated or face disciplinary action. In the meantime, Government administrative regulations allow private employers to implement regular COVID-19 testing at the expense of unvaccinated workers.

State regulations on COVID-19 workplace adjustments have been sympathetic to workers, with avoidance of job losses being the guiding principle. To defend against potential litigation and/or occupational health and safety complaints, employers need to justify orders for vaccinated workers to physically return to the workplace. This should be supported with a reasonable business case for why work-from-home or other alternative work arrangements are no longer feasible.

Adjustments to worker benefits as a result of the COVID-19 pandemic

As workplaces return to pre-pandemic operations throughout 2022, employers and workers will have to navigate recalculations of employee benefits that were delayed, removed or adjusted due to the pandemic working conditions of the past two years.

Certain worker benefits will have to be discontinued, reinstated or readjusted as “new normal” operations resume. It may not be possible for all benefits to be recalculated unilaterally. For example, some benefits – such as a claim for retroactive wage grants under a collective bargaining agreement – are statutorily guaranteed and will need to be negotiated with unions or individual workers.

Employers should consider any benefit grants or adjustments made due to COVID-19 and (i) if possible, discontinue those that are no longer applicable; (ii) be prepared to negotiate readjustments that take “new normal” conditions into account; and/or (iii) resume contractual benefits that were discontinued due to the pandemic (e.g. travel allowances).

KEY DEVELOPMENTS FOR 2021

New Security of Tenure Bill

A new Security of Tenure bill has passed the lower house of the Philippine Congress, and may be deliberated in the Senate sometime in 2021.

A previous version of this bill was vetoed by President Rodrigo Duterte in 2019, because it imposed too‑stringent restrictions on outsourcing.
The new bill attempts to remedy those objections, but still contains provisions intended to (a) impose additional legal requirements for employee terminations; and (b) create limits to the use of contracted labour.
We expect both organised labour and employer confederations to lobby for and against this measure as it makes its way through the Senate and the bicameral deliberation process.

Employer restructurings

Employer restructurings due to the economic crisis created by COVID‑19 will likely increase this year. The Philippines has suffered one of the steepest drops in economic activity in Asia, and by all indications it will continue to be a hard climb into 2021 given the likely slow deployment of a COVID vaccine in the country, the fact that many industries continue to operate below capacity, and significantly reduced consumer spending persists.

Six month legal limits on employment suspensions are already expiring and were due to mostly expire in January 2021, forcing many employers to either negotiate extensions or effect separations.

Public sector and public sector investment

The public sector, and public sector investment, may be significant drivers of employment this year.

With most private sector employers taking a wait‑and‑see attitude, it was the public sector which hired:

to a significant degree, for jobs which have been created as a result of the COVID‑19 pandemic, such as contact tracers and health‑care workers; or
for infrastructure jobs tied to government projects and other public sector investment.

KEY DEVELOPMENTS FOR 2020

Employment status

There is a continuing debate between employers, employees, labor unions and regulatory authorities (primarily the Department of Labor and Employment ("DOLE")) regarding the status of workers and employees.

According to the Labour Code of the Philippines, regular employees are those who perform work which is directly related to an employer's core business and enjoy security of tenure that can only be interrupted for cause, whereas contractual employees are those who are engaged on limited and temporary fixed-term contracts. Although an employer is not permitted to hire a contractual employee to perform the functions of a regular employee, many employers find grey areas to avoid having to 'regularise' workers, in order to keep headcounts and tenure-based benefit costs low.

Regularisation efforts take the form of lawsuits for employment recognition, canvassing by labor unions, or enforcement actions by the DOLE for employers to convert contractual employees to regular employees. The latter initiative peaked in 2017, but there was talk of resurrecting this campaign in 2020 prior to the COVID-19 lockdown.

Occupational Safety and Health (OSH) compliance

Following the amendments to the OSH law in 2018, an expanding institutional awareness of this issue and a renewed focus on OSH compliance by the DOLE were supposed to continue in 2020. However, with the onset of COVID-19, the OSH conversation has now shifted towards (a) the definition of 'essential worker'; (b) the sufficiency of COVID-19 protection measures, including physical distancing and the provisioning of personal protective equipment; and (c) adequacy of work-from-home processes by employers.

'Safe spaces' in the workplace

The 'Safe Spaces' Act recently came into effect and provides protection against sexual harassment in public and private spaces, including the workplace. Employers have new obligations to create specific mechanisms to prevent, investigate and punish gender-based sexual harassment, including those committed online or with the use of digital technology.

KEY DEVELOPMENTS FOR 2019

Implementation of the Telecommuting Act

In recognition of technological developments and employees looking for more flexible working patterns, the Telecommuting Act was approved and came into force on 20 December 2018.

The Act gives statutory recognition to this type of working arrangement and allows an employer to put in place a telecommuting arrangement by mutual agreement with the employee. This will enable an employee to work more flexibly from home or another location where they have a computer and internet connection. The terms and conditions of such arrangement must meet the minimum legal labour standards and ensure that telecommuting employees are treated the same as their comparable office based employees including in terms of pay and benefits.

It is hoped that this Act will help employers attract and retain talent.

KEY DEVELOPMENTS FOR 2018

Contracting-Out and Outsourcing, Anti-Age Discrimination and Labour Law Enforcement Measures

The Philippines’ Department of Labor and Employment (DOLE) issued the following new administrative rules:

Department Order No. 174 regarding contracting-out and outsourcing practices, which imposes new registration and capitalization requirements on entities seeking to provide third party services;
Implementing rules for the Republic Act No. 10911 which prohibits age discrimination in hiring, compensation or promotion; and
Department Order No. 183 which expands the processes under which DOLE representatives conduct a compliance audit in private employer establishments. These audits have resulted in findings whereby the DOLE has ordered private employers to hire, as their own employees, hundreds – and in some cases, thousands – of third party workers.

Higher Minimum Wage Rates in the National Capital Region

The statutory minimum wage rate for Metro Manila, where many businesses are located, was raised to Php512.00 (approximately USD10.00) as of the end of-2017.

With thanks to Rafael E. Khan of Siguion Reyna, Montecillo & Ongsiako for his invaluable collaboration on this update.