Literary Review

Foreign employees in the Philippines may sound unusual to majority of the Filipinos, since
its globally known that the nation is one of the largest labor exporting countries in the
world. OFWs (Overseas Filipino Workers) are accommodated in other countries despite
being foreign to those countries (Paz, 2014). The situation is not new though not highly
magnified until today because of the emerging foreign relations and the rise of
globalization. With the onset of global trade, the influx of products from all over the world
forced local inefficient manufacturers to close down. Similarly, the international labor
market has been flooded with available manpower from countries with excess labor force,
the Philippines included, forcing the international labor market to become more
competitive (Paz, 2014).

Next Asian Tiger Economy

Aside from the known pool of labor exports, the Philippines is no longer referred as the sick
man of Asia as the countrys economy is slowly dominating the global growth projections.
It is now emerging as one of the fastest growing economies in the world and investors are
confident that its transition as a tiger economy is within reach
(theoutsourcedaccountant.com, 2015). Economic growth in the Southeast Asian nation
grew at a rate of 6.1 percent, down from 7.2 percent in 2013. Still, the 2014 performance
makes the Philippines the second fastest-growing Asian country behind China, and ahead of
Vietnam (Dominguez, 2015). The local government is trying to implement changes in order
to compete with other Asian countries and the rest of the world. The economy survived the
recession of 2008 and 2009 in better condition than most, and it is now experiencing
significant growth. The secondary as well as the services sector were the main drivers of the
recent economic upswing, mostly with the support of the manufacturing and construction
industries. Due to continued economic growth, not just foreign investors are lured to the
country but also foreign nationals seeking work. Working in the Philippines is an increasingly
attractive option for many expatriates 1 (internations.org, 2016).

Alien Employees in the Philippines

The overwhelming available manpower in the country does not necessarily mean that
majority are qualified for the available jobs in the country (Paz, 2014). In the preliminary list
of occupations experiencing shortages would show that these occupations require certain
skills which may not be available in the current drove of unemployed and underemployed
Filipinos (Paz, 2014). Among the skills in the occupational shortage list are architect,
chemical engineer, chemist, environmental planner, fisheries technologist, geologist,
guidance counsellor, licensed librarian, medical technologist, sanitary engineer, computer
numerical control machinist, assembly technician, test technician, pilot and aircraft
mechanic (dole.gov.ph, 2014). All in all, there are about 41 million people working in the
Philippines, and more than 21 million of them are employed in the services sector. Other
important sectors for expatriates working in the Philippines are agriculture and the
production industries, which employ 29% and 16% of the labor force, respectively. With an
unemployment rate of 6.3%, conditions are decent (internations.org, 2016).

Opening the country to foreign workers might increase and improve the overall
compensation and benefits of these professions. With the improvement in the
compensation for these positions, OFWs specializing in these fields will have the option of
returning home without necessarily receiving substantially less than what they would have
earned overseas (Paz, 2014).

1
A person temporarily or permanently residing, as an immigrant, in a country other than that of their
citizenship.
Legal Concerns and Arising Issues

Philippines welcoming foreign workers face legal concerns. In connection to this,

surrounding related known issues such as unemployment, cultural differences and labor
rights affects acceptance of non-local employees.

The country has issued Article 40 of the Labor Code provides that any foreign national
seeking admission to the Philippines for employment purposes and any domestic or foreign
employer who desires to engage a foreign national for employment in the Philippines shall
obtain an Alien Employment Permit from DOLE.
The Alien Employment Permit (AEP) is a permit issued to a non-resident alien or foreign
national seeking admission to the Philippines for work after it has been determined that a
competent and able Filipino citizen is unavailable or unwilling at the time of application to
perform the services for which the alien is desired (dole.gov.ph, 2015).

According to the Trade Union Congress of the Philippines (TUCP) recent reports show that
theres a rise in the number of illegal foreign workers in the Philippines. The greater bulk of
the undocumented foreign workers here, TUCP claimed are Chinese nationals while others
are Koreans, Japanese, Indonesians, Malaysians and Vietnamese. Undocumented foreign
workers are employed commonly in the construction, manufacturing, electronics, and
services industries located in Metro Manila, Central Visayas, Davao Region, Zamboanga
Peninsula, Bataan and Batangas.

DOLE strictly enforces the rules on the issuance of alien employment permit and warned
local commercial establishments against hiring of foreign nationals without securing
necessary employment permits will face imprisonment and other penalties. Based on DOLE
guidelines, DOLE regional directors are authorized to conduct ocular inspection to verify
legitimacy of employment of foreign national and a verification inspection of the
establishment employing foreign nationals within 30 days after issuance of the AEP.

Foreign nationals found to be working in the Philippines without a valid AEP would be fined
P10,000 for every year of illegal work or fraction, while companies that illegally employed
them would also be subject to a fine of P10,000 for every year of illegal employment or a
fraction thereof (J. Mayen, 2015).
Social security services in the Philippines, private sector employees, as well as domestic
workers and the self-employed, are covered. It is possible to get voluntary coverage for
insured people who are no longer eligible to receive compulsory coverage and for their
spouses. Government employees and military personnel have their own insurance system.

The social security system in the Philippines covers disability and retirement benefits,
maternity leave, sick leave, survivors, and work-related injuries. Additionally, you might also
want to check whether there are any social security agreements between the Philippines
and your home country.

Contributions you make to retirement, disability, and survivors funds while working in the
Philippines also cover sickness, maternity, and funeral benefits. The contributions are as
follows:

Insured employees contribute 3.33% of their gross monthly earnings.

Employers pay 7.07% of the employees gross monthly earnings.
Self-employed people contribute 10.4% of their gross monthly earnings
(internations.org, 2016).

Differences

Hiring foreign workers in a local company creates a lot of comparisons; between the nature
of work, to compensations and benefits, to treatment and the matter about salary.

An ESRC-funded project called Addup (Are Development Discrepancies Undermining

Performance?) studied the effects of the wage gap between local and international staff
working in lower-income countries. A survey of 1,300 local and expat workers was
conducted and found a wage gap that ranges from 400-900% and causes significant
resentment among local workers.

Expatriates are often quick to dismiss dual salary systems as a non-issue. But local workers
told us a different story. They said disparities created significant feelings of workplace
injustice. They felt less valued than their expatriate colleagues. (The Guardian, 2016)
Wage disparities are often a taboo topic, especially when power relations are
involved. Ishbel McWha-Hermann, now based at the University of Edinburgh, who is a co-
author of the article, found that the fall-out from pay disparities can damage relationships in
the workplace and thereby interfere with aid effectiveness. Employees form work groups
and alliances based on observed differences and similarities. A likely source of comparison
is socioeconomic status linked to salary.

may be undermining poverty-reduction initiatives before they even reach the community
(I. McWha-Hermann, 2016)

The wage and benefits gap cannot be explained by differences in experience or skills. Addup
compared local and expatriate workers doing similar work with equivalent skills and
experience. Rather, dual salaries exist because expatriates originate from higher-income
economies and labour markets.

Appropriately enough perhaps, dual salaries are popularly referred to in some Pacific
countries as economic apartheid. Having this kind of nomenclature in the aid sector is
ironic considering its poverty-reduction aim.

The dual salary system2 is a difficult structural inequity that makes it hard for many workers
in aid and development both local and international staff alike to work together, support
each other and achieve project goals.

The research measured the size of the wage gap and its effects on workers in six lower-
income countries: India, China, Malawi, Uganda, Solomon Islands and Papua New Guinea.

Nearly 1,300 local and expatriate workers from around 200 organisations. These
organisations were drawn from the aid, education, government and business sectors of the
six countries. Participants worked in a range of job roles, from teachers, to engineers, to
doctors and managers, with expertise in areas such as microfinance, child labour, program
administration and much more.

2
Also known as two-tier system is a type of payroll system in which one group of workers receives
lower wages and/or employee benefits than another
Across the Addup sample, local staff were paid four times less on average than their
international counterparts. This was despite having similar education and experience. In
Papua New Guinea and the Solomon Islands, the average rose to nine. In individual cases
the difference was far greater. Alarmingly, 80% of local workers said that their pay was not
sufficient to meet their everyday needs.

Disparities are not limited to salaries. They include accommodation allowances, vehicles,
household staff, school fees, insurance and other benefits. These commonly form part of
expatriate packages that are not available to local staff.

And while Addup is to date perhaps the most detailed study of pay disparities in the
humanitarian sector, research from the corporate sector has had similar findings. A study of
local and expatriate managers in multinational companies in Singapore, for example, found
salary disparities were causing resentment and dissatisfaction among local managers.

The Singaporean study found that dissatisfaction relating to disparities ultimately reduces
productivity and encourages high staff turnover.

The research also found that dual salary systems were contributing to a brain drain because
talented local staff often leave their home countries for higher-paying jobs overseas. This
may make it hard for the humanitarian sector to achieve its goals of building capacity in aid
recipient countries and increasing local ownership of development initiatives (The Guardian,
2016).