SubContracting Guidelines 2024 PDF

EMPLOYEE RELATIONS SUB/CONTRACTING Topic # 2 September 2024 Concept A contractor refers to “any person or entity engaged in a legitimate contracting or subcontracting arrangement providing services for a specific...

EMPLOYEE RELATIONS SUB/CONTRACTING Topic # 2 September 2024 Concept A contractor refers to “any person or entity engaged in a legitimate contracting or subcontracting arrangement providing services for a specific job or undertaking farmed out by (a) principal under a Service Agreement.” (Section 3(d), DO-174) SUBCONTRACTING  CONTRACTOR Contractor or subcontractor" refers to any person or entity engaged in a legitimate contracting or subcontracting arrangement. PRINCIPAL EMPLOYEE "Principal” refers to any employer who “Employee” includes one employed by a puts out or farms out a job, service or contractor or subcontractor to perform or work to a contractor or subcontractor. complete a job, work or service pursuant to an arrangement between the latter and a principal.  How it Works? 01 02 03 What? How? Execution The principal which decides to The subcontractor has the The employees are engaged by farm out a job or service to a capacity to independently the subcontractor to subcontractor. undertake the performance of accomplish the job or service. the job or service  A contractor or a subcontractor is registered with the Department of Labor and Employment (DOLE) as legitimate job contractors, who perform a job or work farmed out or outsourced by a principal under a Service Agreement. Governing They have a distinct and independent business, which enables them to perform the Principles outsourced job or work according to their own manner and method. They are free from the control and/or direction of the principal. The Service Agreement between the principal and the contractor should have terms that would ensure compliance with all rights and benefits for all the employees of the SUBCONTRACTING contractor or subcontractor under labor laws. DO 174 Department Order No. 174, series of 2017 (DO 174) or the Rules Implementing Articles 106 to 109 of the Labor Code, As Amended was issued by the Department of Labor and Employment (DOLE). This document provides set of guidelines governing contracting and subcontracting. DO 174 DO 174 prohibits labor-only contracting: The contractor or subcontractor does not employ their right to manage the performance of an employee’s work. Employees recruited and placed by a contractor or subcontractor perform actions that are related directly to the principal’s main business operation. The contractor or subcontractor does not have substantial capital. The contractor or subcontractor does not possess investments in the form of equipment, tools, work premises, machinery, supervision, among others. DO 174 Other illegal forms of employment arrangements Contracting out of a job due to a strike or lockout, whether actual or imminent. Contracting out of a job currently being performed by union members and interfering with, restraining, or coercing employees in the exercise of their rights to self-organization. Repeated hiring by the contractor or subcontractor of employees for a brief duration or under an employment contract. The contractor or subcontractor or subcontractor requires employees to sign an antedated letter of resignation, waiver of labor standards, quitclaim releasing them from liability from payment of future claims, or blank payroll prior to being hired as an employee to to continue employment. Such other practices, schemes or employment arrangements designed to circumvent the right of workers to security of tenure. DO 174 Highlights Contracting out of a job due to a strike or lockout, whether actual or imminent. Contracting out of a job currently being performed by union members and interfering with, restraining, or coercing employees in the exercise of their rights to self-organization. Repeated hiring by the contractor or subcontractor of employees for a brief duration or under an employment contract. The contractor or subcontractor or subcontractor requires employees to sign an antedated letter of resignation, waiver of labor standards, quitclaim releasing them from liability from payment of future claims, or blank payroll prior to being hired as an employee to to continue employment. Such other practices, schemes or employment arrangements designed to circumvent the right of workers to security of tenure. DO 174 Employer’s Responsibilities Listed below is a summary of the mandatory benefits and provisions for employees in the Philippines under the Labor Code and special laws: 1. Minimum wage 2. 13th month pay (after 1 month of service) = 1/12 of the total basic salary earned by an employee within a calendar year 3. Overtime pay= 25% premium on hourly rate 4. Night shift differential if work between 10:00 PM to 6:00 AM = 10% premium on hourly rate 5. Special Non-Working day = 30% premium if worked 6. Regular holiday pay= 100% premium if worked, paid if unworked 7. Service Incentive Leave = 5 days paid leave for every year of service 8. Maternity Leave = daily maternity benefit equivalent to one hundred percent (100%) of her average salary credit for sixty (60) days or seventy-eight (78) days 9. Paternity leave = 7 days leave with pay (married only) 10.Parental leave for solo parents= 7 days leave with pay for every year of service 11.Leave for victims of Republic Act 9262 or Anti-Violence Against Women Law = 10 days leave with pay 12.Special Leave for Women= Two months leave with pay for women who underwent surgery due to gynecological disorders 13.Social Security System contribution (based on salary) 14.Pag-ibig contribution (based on salary) 15.Philhealth contribution (based on salary)