Two-sided labor issue

European budget airline Ryanair, which had managed to grow its business over three decades across the continent by offering low fares and a no-frills service, was recently hit by a labor strike.

Being the second largest airline in Europe in terms of passengers, the work stoppage caused quite a stir after Ryanair labor unions in several operating countries caused some 250 flights to be cancelled, affecting over 40,000 ticket holders.

The work stoppage also forced Ryanair management to reconsider its initial position of playing deaf to the demands of cabin crew and pilots to apply local laws rather than that of Ireland’s where Ryanair’s main headquarters is based. Irish labor laws are known to be far stingier than any European country’s.

How this will affect Ryanair is still being speculated on, but taking a leaf from a decision to recognize unions just last December, share prices could very well suffer, although perhaps not as badly as that eight percent loss in share value that wiped out more than one billion euros.

Shareholders often see labor issues as an additional operating cost that could affect not just a company’s bottom line, but also its plans for future expansion. In the European airline industry, which has been seeing a spurt of competition in the budget sector recently, this could be a big concern.

Balancing act

Across the globe, regardless of the country’s economic standing, concerns about working conditions continue to manifest as labor demands for better working conditions and managements calculate the company’s capability to absorb the additional cost by increasing wages or benefits.

In the Philippines, labor issues are once again at the forefront as Congress readies to debate on the issue of “endo,” or the current practice of many companies to avoid regularizing contract staff by ending their term of employment well within the six months that the law stipulates.

Endo has been many Philippine companies way of saving on additional labor cost that permanent employment incurs. This is usually reserved for work that is seasonal or at starting levels that don’t require specialized skills. Examples of these are sales clerks or cleaners.

Work contracting per se is not a bad thing. In some countries, a growing number of people prefer the higher wages given to contract workers in lieu of permanent job security and all its attendant benefits, like paid vacation leaves and retirement pay.

In Australia, for example, the law stipulates that contract or casual workers get a 25 percent premium on top of the base wage that a regular employee would get. This should be well and good if the law were to be strictly followed.

But in the Philippines, some labor laws are circumvented or not strictly enforced. Recent studies have shown that more casual jobs in Australia are turning out to be less “casual,” with more workers increasingly staying at jobs that should be regarded as permanent positions.

This is about the same case for the Philippines, where some employers find ways to circumvent a law that is meant to safeguard an employee’s right to secure wages and benefits.

Status quo

The Lower House had already passed its proposed amendments to the Labor Code specific to contracting, and the President had just sent a letter to the Senate asking them to fast track the deliberations on the issue based on a bill filed by Sen. Joel Villanueva.

The proposed amendments, according to Sen. Villanueva, would remove “ambiguities” in the current labor law about contracting terms that employers are able to circumvent. The amendments also intend to protect contract workers who go through manpower agencies.

Severely impair competitiveness

Business, however, is worried about the reality of an explicit prohibition on contracting, citing that the Philippines would be the only country in the world that would disallow all forms of contract work, and that this would severely impair Philippine companies’ competitiveness.

The Employers Confederation of the Philippines (ECOP), Philippine Chamber of Commerce and Industry (PCCI) and the Philippine Exporters Confederation Inc. (Philexport), three of the country’s biggest business groups, called for a status quo of the current labor law, stating that this already gave contract workers adequate protection.

The three business groups also cited the adverse effects on small and medium enterprises (SMEs) which are more sensitive to labor costs, and who benefit most from contract employment during periods when laborers are needed for seasonal work.

Win-win solutions

We need win-win solutions. Admittedly, the law does have loopholes that allow abuse, so much so that many workers go through the contract employment mill for years while continuing to be employed without security of tenure and the appropriate benefits.

On the other hand, one could ask why contract workers are unable to enter the ambit of permanent employment. Most often, they do not have the proper training and aptitude to deserve positions in the company and contribute to the company’s profitability and growth.

It would be suicidal to ban all forms of contractual employment because there are seasonal jobs that do not require full time or permanent positions in the company. A better way to protect seasonal workers is to apply premiums that will compensate for the loss of benefits due to permanent employees.

While the current labor law needs updating to ensure that workers’ welfare is given more weight, it must not become a measure that would impinge on businesses’ competitiveness and productivity. The law must protect the weak, but should not kill the goose that lays the golden egg.

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