Forum on job contracting

Tomorrow, July 10, 2008, Berkeley Systems Management Inc., in cooperation with PEZA and CCCI will be hosting an industry forum on job contracting. Personally, I believe this forum is both timely and relevant to the present economic and labor situation in Cebu.  The said forum will be held at Cebu Parklane Hotel, registration begins 8:30 am.

To provide some advanced info, below are some Frequently Asked Questions (FAQ) pertaining to job contracting shared by Berkeley Systems Management Inc.

What is contracting or Job-contracting? Contracting or subcontracting (job contracting) refers to an arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. (Art. 106, Labor Code)  For the purpose of the undertaking of the business that to be farmed out to the contractor or subcontractor (job contractor) then employ its own employees. Contracting and subcontracting (job contracting) are synonymous under Philippine labor law. The term that is more commonly used is subcontracting. 

When is contracting or job-contracting legitimate? Contracting or subcontracting (job contracting) shall be legitimate if the following circumstances concur: (1.) The contractor or subcontractor (job-contractor) carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own directions of the principal in all matters connected with performance of the work except as to the results thereof.  (2.) The contractor or job-contractor has substantial capital or investment. (3.) The agreement between, the principal and the contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self- organization, security of tenure and social and welfare benefits. (D.O. No. 18-02) Persons or entities which engage in the prohibited form of contracting are also known as “labor-only-contractors”. Those which engage in legitimate contracting are known as an “independent contractors.”

Is Legitimate Subcontracting Different From Labor-Only Contracting? How Is Labor-Only Contracting Defined? Yes, legitimate job-contracting is different from labor-only contracting because the former is allowed and the latter is illegal and prohibited.  Under DOLE Department Order No. 18-2 states that there is labor-only contracting where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and the following elements are present:  (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility; and (b) The employees recruited, supplied or placed by such contractor or subcontractors are performing activities directly related to the main business of the principal.

For more credit & collection (C&C) questions, comments and rejoinders you want to share, you can reach me at 0917-7220521 or at [email protected]