The Philippine government has passed essential labor and employment laws that protect, support and strengthen the outsourcing industry like the Department of Information and Communications Technology Act of 2015 (RA 10844), Special Economic Zone Act (RA 7916), Data Privacy Act of 2012 (RA 10173), and Telecommuting Act (RA 11165). These labor laws for BPO employees not only ensures that all businesses in the information and communication fields follow trade and safety laws as it intends to expand the sector while assisting in maintaining the quality of its services, but it also makes BPO activities in the Philippines more convenient and beneficial both for the local and international economy.
The Philippines is one of the fastest-growing nations in the outsourcing industry, with a staggering 30% growth within the last decade alone. In fact, business process outsourcing (BPO) accounts for one of the biggest boosts to the Philippine economy and currently employs more than 2 million people in several sectors, boasting a net worth of $24 billion. Examples of these sectors include SEO, call centers, online marketing, virtual staffing, IT services, and more. Along with the remittances of 10 million overseas Filipinos, outsourcing is one of the legs of the Philippine economy. The Philippines is among the top outsourcing countries Western countries outsource to, there really is no doubt that the country has emerged as the world’s largest—and leading—top outsourcing destination.
Philippine laws on outsourcing – here’s what you need to know
Republic Act 10844: The Department of Information and Communications Technology Act of 2015
Late Philippine President Noynoy Aquino signed Republic Act no. 10844, which also renames the Department of Transportation and Communications (DOTC) to “Department of Transportation.” RA 10844 states that information and communication have vital roles in nation-building and that it is the state’s policy to “ensure universal access to quality, affordable, reliable and secure ICT services.” It should also “ensure the provision of a strategic, reliable, cost-efficient and citizen-centric information and communications technology infrastructure, systems and resources as instruments of good governance and global competitiveness.”
The law defines information and communications technology as “the totality of electronic means to access, create, collect, store, process, receive, transmit, present and disseminate information.” Its powers and functions include policy and planning; improved public access; resource sharing and capacity-building; and consumer protection and industry development.
Republic Act 7916: Special Economic Zone Act
The Republic Act No. 7916 or Special Economic Zone Act created the Philippine Economic Zone Authority (PEZA) and provided for the legal framework and mechanism for the creation, operation, administration and coordination of special economic zones in the Philippines. Through this law, PEZA was empowered with a broader mandate to develop ecozones all over the country to generate incremental investments, jobs and exports, and to spur industrialization and countryside development.
Prior to PEZA, the predecessor laws/agencies were the Foreign Trade Zone Authority (FTZA) as mandated by RA 5490 of 1969 and the Export Processing Zone Authority (EPZA) as created by Presidential Decree (PD) 66 of 1972. These pioneered the creation of ecozones as a government strategy to attract FDIs and export-oriented industries into the country. The Philippines was actually second to Taiwan in Asia that experimented with the freeports and export-processing zones (EPZs) in the 1960s when it was first introduced as a policy tool for development and export-oriented growth particularly for developing economies.
RA 7916 makes the Philippines an attractive destination for outsourcing as it appeals to foreign investors with the various tax breaks and other crucial incentives within the special economic zone designated for BPO.
Republic Act 10173: The Data Privacy Act of 2012
According to EECI, in 2012, the Philippines passed Republic Act No. 10173 or the Data Privacy Act of 2012 (DPA), modeled after the Data Protection Directive (95/46/EC) “to protect the fundamental human right to privacy of communication while ensuring free flow of information to promote innovation and growth [and] the [State’s] inherent obligation to ensure that the personal information in information and communications systems in government and in the private sector are secured and protected”. The DPA was passed in accordance with the Philippines agreements under ASEAN Vision 2020 and as a response to the rising BPO industry, with many of its terminologies and provisions similar to privacy laws in other jurisdictions.
Directive 95/46/EC of the European Union and the Asia Pacific Economic Cooperation (‘APEC’) Information Privacy Framework had significant influence over the Philippines’ first ever consolidated data privacy legislation. According to Mondaq, the introduction of the Data Privacy Act of 2012 follows a series of developments in the expansion of the data privacy laws in the Asia Pacific region and adds to an increasingly complex data privacy environment, particularly for organisations using business process outsourcing services based in the region.
Republic Act 11165: Telecommuting Act
The Philippine Congress enacted Republic Act No. 11165: the Telecommuting Act — the first legislation recognizing telecommuting or “working from an alternative workplace with the use of telecommunication and/or computer technologies”. The 2019 law emphasizes two (2) key principles: Fair Treatment and Data Privacy.
According to Lexology, the Fair Treatment principle ensures that telecommuting employees are accorded with the same minimum labor standards and treatment as on-site employees. This includes overtime, holiday pay, and entitlement to leave benefits. The Telecommuting Act also requires that telecommuting employees be given the same or comparable workload and performance standards as on-site employees. As to the principle of Data Privacy, the Telecommuting Act simply requires employers and employees to agree on minimum standards that will protect personal information. For this purpose, the employer is responsible for taking the appropriate measures to ensure the protection of data used and processed by the telecommuting employee for professional purposes.
Labor laws for BPO employees
Since the Philippines is home to more than 800 outsourcing companies, trade, labor and employment laws need to be amended and updated to protect one of the most vital industries in the country. According to Magellan Solutions, more than 15 percent of the entire global outsourcing industry is served by Philippine outsourcing services. The industry is also expected to expand by 8-10 percent annually for the next 5 years. Additionally, the Philippines has constantly been listed as one of the top five locations in the world for outsourcing. The Department of Information and Communications Technology Act of 2015 (RA 10844), Special Economic Zone Act (RA 7916), Data Privacy Act of 2012 (RA 10173), and Telecommuting Act (RA 1116) not only protect the BPO sector and outsourcing industry, but also help it grow
Safe, legal outsourcing in the Philippines
According to EECI, in 2012, the Philippines passed Republic Act No. 10173 or the Data Privacy Act of 2012 (DPA) “to protect the fundamental human right to privacy of communication while ensuring free flow of information to promote innovation and growth [and] the [State’s] inherent obligation to ensure that personal information in information and communications systems in government and in the private sector are secured and protected”. The DPA was passed in accordance with the Philippines agreements under ASEAN Vision 2020 and at the urging of the growing business process outsourcing industry. The law was modeled after the Data Protection Directive (95/46/EC) with many of its terminologies and provisions similar to privacy laws in other jurisdictions.
Philippine laws on outsourcing are very important and strict due to the high demand for Philippine-based outsourcing companies over the years. According to the KDCI, the Philippine labor code requires organisations in the Philippines to pay employees an additional 13th month and 14th month pay annually, and an employer cannot fire an employee at will in the Philippines – a justifiable cause and proper documentation are required to terminate any Philippine employee.
According to connectOS, the Philippine economy is one of fastest-growing economies in Southeast Asia. A significant reason why the Philippines maintains this reputation is because the government has invested significantly to position Manila as the leading global provider of outsourcing services and the industry is currently valued at $250 billion. Foreign investment is welcomed and government support is very much alive. The government continues to actively invest in the nation’s infrastructure and technology to support the outsourcing industry. Tax and non-tax incentives are available to support foreign investment.
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