Friday, October 4, 2013

14th Month Pay, Anyone?

Senator Vicente Sotto III, the Philippine senate minority floor leader, has proposed a bill that would grant rank-and-file employees from the government and public sectors a 14th month pay.

Despite the supposed benefit to employees, most people give it a cold shoulder treatment with good reasons. The proposed bill came in the midst of the pork barrel scandal which exposed the extent of wide spread corruption committed by elected high government officials and some heads of the government agencies. Some people think that the proposed bill is intended to subtly deodorize the politicians allegedly involved in the scandal.

If the bill filed by Senator Soto becomes a law, the 14th month pay will effectively increase the cost of labor in the manufacture of the company’s finished products. As a result, the price of goods and services will also increase because businessmen will pass the additional cost to the consumers. An additional pay to a salaried worker is always beneficial to him, but not so with other people who do not depend on it for their income. People such as the self employed, pensioners, and those who are paid on commission, boundary and task basis and most especially the underemployed will even have the purchasing power of their income diminish because of the increase of the price of goods and services that they will have to pay for. And this is not to mention the unemployed who have no income at all.

The proposed bill would probably discourage new investors, both local and foreign, to put up their business in the country.  If the Philippines would like to be competitive in attracting foreign investors, then it should offer better investment incentives than those of its neighboring countries such as China, Thailand, Viet Nam, Indonesia, Singapore, and Malaysia among others.  If the cost of doing business in the Philippines is too high because of high labor cost and taxes then the foreign investors will skip the Philippines as its destination in favor of countries that have friendlier atmosphere in doing their business.

Workers in the Philippines are protected by the government for their wages and benefits and employers are even obliged to give 13th month pay to their rank-and-file employees. However, it is believed that some of them do not even pay the basic minimum wage to their employees as mandated by law. Some employees tolerate this practice thinking that being underpaid is much better than having no pay at all because of having no jobs. It would be more prudent for the government to see to it that employees are paid what is rightfully and legally due to them first before proposing new payment schemes that will not be followed by some employers.

I think that beyond the pays and benefit currently set by law, any extra pay to the employees should be determined by the economic factors prevailing at a certain time and the productivity of the employee. Although there are some companies that exploit their workers, there are others which are generous to workers in terms of giving benefits. Business entities fall in bad or good times. In good times they can pay bonus to their workers. But compelling them to pay their workers more when business situation is bad may cause them to go bankrupt.

Senator Vicente Sotto III, the proponent of the 14th Month Pay Bill, should have to make further study of his bill because if it becomes a law it could have a far reaching implication of the country’s economy as well as the well being of the people. The advantages derived from it should outweigh its disadvantages.