Newsletter May 2018
As the world tilts towards potential trade wars, a different type of protectionist tendency has been brewing over the last decade.
Governments have been shifting towards the "citizens first " protocol with respect to talent. It has become more and more difficult to bring qualified talent to render services in many countries.
This series of articles highlight some of these jurisdictions and the measures taken. We will kick off with Singapore and the Philippines.
Harry… on behalf of The Innovare Team
"...To prevent this (unfair employers discriminating against our locals) from happening, we must be pro-business, but only to those who are pro-worker."
Minister for manpower, Lim Swee Say, Mar 2018
The journey to switch towards the local workforce began in earnest about eight years ago. Starting with the lower salaried ones, in recent years, the gear has shifted towards the higher paid ones.
Some of the measures include:
- Raising the Employment Pass (EP) salary minimum from S$2,500 to S$3,600 for new graduates and more experienced candidates need higher salaries (at least S$6,000). This has the effect of reducing the number of eligible foreigners applying under this more restrictive scheme.
Introducing the Jobs Bank to ensure that locals are considered first before a high skilled job goes to a foreigner.
From 1 July 2018, the Ministry of Manpower (MOM) will broaden the advertising requirement to firms with 10 or more employees and job positions that pay a fixed monthly salary of less than S$15,000.
“These changes will ensure that the Fair Consideration Framework (FCF) job advertising requirement keeps pace with income changes, and that the local workforce continues to be fairly considered for job opportunities,” MOM said in a release.
Currently, firms with 25 or fewer employees and jobs that pay S$12,000 and above a month are exempted from the FCF advertising requirement.
- Blacklisting of employers who are perceived to have practices which discriminate against locals. Thus far 500 companies have been placed on the Ministry of Manpower’s watchlist. For those companies, their ability to sponsor EPs are severely curtailed as they are subjected to greater scrutiny until they demonstrate changes to their policies and practices.
- Tightening the Employment Act to protect contract workers:
As part of changes to the Employment Act in 2019, the ministry will be removing the criterion that excludes employees drawing a monthly salary of more than S$4,500 from provisions such as public holiday and sick leave entitlements, timely payment of salary and allowable deductions.
This move would extend legal protection to all workers, except for public servants, domestic workers, and seafarers who are covered separately, such as by other legal provisions, due to their nature of work.
- MOM will also improve how employment disputes are settled. Workers will now have to go to Employment Claims Tribunals (ECT) regarding dismissal claims and salary issues to resolve their cases.
In fact, unlike the past where a vast majority of EP applications were approved less than two weeks with an expressed online system put it place to expedite, the past year showed that there were more questions raised during the approval process. Consequently, since 2016, 1900 EPs were rejected, indicating a reversal of the trend.
Whilst businesses have to take active measures to meet their talent needs, the authorities have assured that those with special skills not readily found locally will still be approved.
"I will not run a country that way. If those who have money won't accept this, then you campaign against me. Make sure tatalunin ninyo ako (Make sure you will beat me). I will not go for it. It is not a policy. It is not good," Duterte declared in Nov 2015, referring to the problem of contractualization.
Contractualization or endo (end of contract) is the illegal practice of hiring fixed-term employees and continuously renewing their contracts to avoid giving benefits a regular worker is entitled to. Endo workers are bound by a five-month timeframe so that companies will not make them regular employees, complete with various benefits after six months of work, for example, 13th month pay. There are an estimated 1.3 million contractual employees in the country.
As early as November 2015, Duterte, then mayor of Davao City, President of the Philippines , said contractualization is not for a country like the Philippines. Ending this labor practice is among the key campaign promises of President Duterte. Since then, various measures and law have been put in place to tighten the control over endo and limit the abuse of short term workers. Notably, in March 2017, DOLE (Department of Labor and Employment) issued Department Order (DO) No. 174, setting stricter guidelines for contractualization with the aim of converting these contract workers into permanent staff with full benefits.
Last year, DOLE was able to regularize at least 125,000 of the 200,000 contractual workers it planned to put in permanent positions.
The sweeping nature of such initiatives mean that even companies who require contract staff for genuine seasonal or short term operational needs, without any intent of worker abuse, are affected. It thus makes some business sectors uncompetitive and unable to respond to short term market changes. Unfortunately, one solution does not fit all.
Companies should regularly review its contracting arrangements to ensure that they are legalised contractualization. This includes ensuring that certain mandatory provisions are included in the contractor service agreements and employment practices to ensure compliance. This is to avoid wide sweeping sanctions by the DOLE including disruptions to their operations, damage to reputation and even closures.
Various measures put in place have led to the restricted flow of talent where it is needed most. Often, the interests of the business community are not congruent with the policies in this respect. Hence, there is always an attempt to fine tune, make exceptions and review the impact very regularly. It is a space that needs constant watch, especially in the independent contractor sector.
Our Compliance team continually conducts research, supported by local subject experts to ensure we are abreast with ever changing laws and practices to ensure that our Contractors operate within local requirements.
Should you need assistance in Asia Pacific, we would be pleased to hear from you.
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