Retired, rehired; compressed, oppressed

Labor-related questions never run out of style. I wish to answer some, if I may, this Sunday.

Q. I am past 60, still agile and sharp. I have retired but my employer wants to hire me back as a consultant. I am still willing to work, although for lesser hours to have some retirement time. The last thing I want is more trouble with tax return filings. Will I really be liable for VAT, and be required to keep accounting records?

An independent consultant status is considered engaged in business. He is subject to value-added tax (VAT) if his gross receipts are in excess of about P1.9 million annually, but he can also claim an optional deduction of 40 percent based on his gross revenue. Compared to that of an employee, the tax rate of 32 percent can effectively be reduced to 19.2 percent after optional deduction. Yes, there is a 12-percent VAT but you can pass this on to the principal if you have registered VAT receipts.

If that more favorable tax treatment is too much trouble for you to comply with, I would say there is nothing in the law that prevents a retired employee from being hired again as an employee, even on part-time basis. A retired employee who is desired to be rehired by the employer is presumably with special skills and importance. This gives him equal footing to negotiate employment terms with the employer without getting concerned with labor rules.

If you will, however, have arrangements with several employers, you may have problems justifying that you are an employee of each company because at your level, that seems to work only if you are an independent consultant.

Q. A compressed work week can help ease some suffering from traffic. Can the government suggest or encourage compressed work days? It will also save on costs spent in unproductive time while trapped in traffic.

Compression of the work week without payment of overtime is allowed under labor rules, except that there is a rule that in a compressed work week, if the employee works for 12 hours a day, he should be paid overtime. This can happen if a work week of 48 hours or six days is compressed to four days. Indeed, serious traffic issues, which are no longer a laughing matter nowadays, and the desire for quality time with families, push the compressed work week idea to be tried out.

The real issue, however, is a commercial one. What does it do to productivity, and how do we attend to client needs on days when we are absent? For factory personnel whose output we can easily measure, if they produce “x” amount in five days a week, they should produce the same “x” amount if they work for only four days a week. For most workers, however, the test of retaining productivity is more complex, and the dynamics of preserving quality client service on all days of the week is even more complex. If one courageous company with thousands or even just hundreds of employees tries compression and shares that experience, that would not only be a sight to behold but would be a business lesson for everyone. Please write ABC if you tried it.

Q. My employer is well-known in the business process outsourcing (BPO) industry and is recognized as employer of choice and has received awards. I have been working for my employer for less than six months and not yet a regular employee. I am assigned to my first project. We would work long hours, recently even overnight. We receive meal allowances but we are not paid overtime. Since my employer received all these recognitions about being a model employer, could they be correct about not giving us overtime pay because it depends on the project or client?

From your description, it seems you are a probationary employee, although for the sake of argument, let us even say you are a project employee. Labor standards apply to any type of employee, so they apply to probationary, project-basis or contractual employees. Overtime pay for work in excess of eight hours is a very basic and important labor standard that if the employer does not give it, you can file a labor claim for unpaid wages and unfair labor practices.

The only way the employer can get away with not giving overtime pay is if you are already a managerial employee, who serves based on trust and confidence and whose value does not necessarily depend on the number hours they put in; or if you are an independent contractor.

There is a big difference between a contractual employee and an independent contractor. While both are under some fixed contract, which can be renewed subject to the evaluation of the company, the difference is the control not only on the output but over “how” you do your work. The control of the company as to the “how” creates an employer-employee relationship. The fact that you need to be in the work place at specified times, trained and supervised closely on how you do your work, are the best indications that you are not independent. Hence an employee, non-managerial at that, should be protected by labor standards.

About the awards of your employer – it is indeed hard to maintain consistency all the time. But compliance with labor standards is the basic thing a company can do to say it cares for its employees. And the difference between compliance and non-compliance can be the thin line that separates the group of good companies vs. the fly-by-night, veritable sweat shops.

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Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He also chairs the Educated Marginalized Entrepreneurs Resource Generation (EMERGE) program of the Management Association of the Philippines (MAP). Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.