Full-speed development

The Philippines economy stands unique in Southeast Asia and across the region. On the one hand, a focus on education and training is building its workforce to a developed nation standard, but the battle to attract and retain talent is still making life tough for HR across the archipelago

There was a time when the junior ranks of knowledge-based businesses in the cities of the Philippines were notoriously harsh environments. Most labour, even skilled talent, was easily replaceable in a market overflowing with young and eager job seekers, and employers were able to leverage that to keep wages and conditions relatively low.

That extended supply is still a feature of the Filipino labour market today, but it has been balanced out – and now overtaken – by skyrocketing demand for talent across the country. Businesses are clamouring for labour of all skill levels at the same time as the millennial generation – with all of its demands and preferences – enters the workforce en masse.

Sustainable talent attraction, recruitment, and retention policies are now high on HR’s agenda. Whether it is in the financial centre of Makati or the tourism-focused regions of Cebu and Boracay, all three will be needed if businesses are to keep up with the surging national economy.

Southeast Asia’s fastest-growing cub

“Surging” may in fact be an understatement. Even within the fast-developing “tiger cub” region of Southeast Asia, the Philippines economy is growing at relatively break-neck speed.  Last year, it recorded a 7.1% increase in GDP, it’s strongest growth in three years and the best among the region. A Bloomberg survey of global economists predicts that trend will continue during 2017 and 2018 to make the Philippines the fastest-growing economy on the planet.

It is a mix of both low- and high-technology industries pushing the Philippines forward. A relatively free and open economy has enabled the country to become a key centre of many global supply chains, with businesses in Manila doing assembly work for many electronics and semi-conductor brands. Business process outsourcing continues to be a key focus in the cities, but traditional activities such as ship building, petroleum refining, tourism, and even fishing and agriculture also still figure high among the Philippines’ chief exports.

Talent in demand

All of these industries come with a huge reliance on human talent – which is proving both an enabler of development in the Philippines, and its own challenge for HR professionals there.

“There are a lot of companies entering the Philippines now,” says Louie Ocampo, Managing Director of the Manila-based Divergence HR Consulting. “Employees have a lot of options, and that makes talent acquisition and retention an important goal for HR.”

Bea Bartoleme, Practise leader and Programme Manager with The Birches Group in its global data centre in Manila, acknowledges that talent scarcity is a problem throughout the emerging markets at the moment. But she says there are some factors that make it particularly pronounced in the Philippines.

Chief among these is the fact that the millennial generation now makes up the biggest part of the national workforce. These workers (aged in the mid-20s on average) are known to be more fickle and less loyal than any of the employees that came before them. “There is a lot of job-hopping now,” Bartolome says. “It’s not just moving across to competitors – young workers are also moving between sectors and industries.”

Geography is also no barrier to this incredibly flexible and mobile demographic.  Young Filipinos are happy to move across the country if it means more interesting work or more opportunity for career development. And international positions – with the significantly higher salaries on offer in Singapore and Hong Kong – are also putting a strain on staff retention strategies.

Bartolome says providing a positive employee value proposition becomes vital in this situation. That should start with ensuring a competitive total compensation package that is benchmarked against a range of roles with comparable or transferrable skills.

“Employers need comprehensive, and reliable labour market reports to ensure they are offering a full perspective of the market across different sectors with sustainable compensation,” she says.

Retention strategies

Of course, getting staff on board is just the initial challenge. As Ocampo points out, holding on to employees in this kind of environment is complex and fraught.

“We have a number of clients facing this specific issue,” he says. As a consultant working with the Business Process Outsourcing sector, Ocampo advises clients to invest in training and career development as a key retention strategy.

“Gone are the days when you just focused on your commercial brand,” he says. “Now, companies need to focus on their employer brand at every touchpoint. Even SMEs have to build strategies around managing retention.”

Bartolome agrees that taking a “build” approach to talent, rather than trying to “buy” it through the fast-changing labour markets, helps to address both the acquisition and retention challenges for HR in the Philippines.

“Companies have to make their jobs interesting.  Employees aren’t just looking for high salaries, but opportunities for growth and ways to integrate their work and personal lives,” she says.

With this in mind, many organisations are fast-tracking their flexible working options for staff. This is proving particularly popular in Manila-based workplaces, where the city’s infamous traffic congestion can take an enormous toll on workers’ professional lives.

“A five kilometre distance can entail up to two hours of commuting,” Bartolome says without exaggeration. “So a lot of companies have started to have flexible start times or work-from-home options.”

Her own company is one such example. The Birches Group, which offers research-backed HR consultancy for every market in the region, has seen an increase in both retention and productivity since introducing flexible working options last year.

Ocampo warns employers that whatever strategy they undertake, they also need to be realistic in their retention goals. “In reality, you have to accept that turnover will be higher than businesses may be used to,” he says. “That is the environment we are in.” 

Regulators getting tough

Ronaldo Turla, Managing Director of Manila consultancy Talent Reach, says labour markets in the Philippines have been subject to close to the same set of basic employment regulations since the 1970s.

“The Labor Code of 1974 both protected employees’ rights, as well as emphasised the rights of employers,” he says.

The balance may have been right on paper, but many less scrupled employers have taken advantage of loopholes and ineffective enforcement regimes over the years since. Turia says that is something the national government is now looking to overcome.

“The Department of Labor and Employment has been actively responding to the times and needs of the current workforce,” Turia says. “One of the noticeable differences has been the strict implementation of the minimum wage law for most growing enterprises.”

As well as continuing efforts to enforce minimum wage rules across the country, authorities under new President Rodrigo Duturte have announced plans to crack down on employers who use short-term contracts to avoid hiring staff on full time wages and benefits.

The new rules explicitly ban the so-called “5-5-5” schemes, where employers continually issue new contracts for staff after every five months of work. This means those employees never actually qualify for the statutory benefits given to regular workers after six months’ service.

But the crackdown will also target recruitment agencies operating in the Philippines. Some of these have been perceived as helping employers to skirt the rules.

“The core idea and objectives of this regulation have been integrated into the Philippine labour law in previous years,” Ocampo says, adding that the crackdown will start to regulate the practices of third-party contractors in the country.

“We can no longer offer short-term contracts, but project-based opportunities will still be available, as long as these are legitimate projects with definite start and end dates, as defined by the law.”

Still, there are concerns among other HR service providers that their key service is set to be unnecessarily curtailed. The World Employment Confederation, which represents the recruitment and employment industry globally, is understood to be seeking a meeting with Labour Secretary Silvestre Bello to discuss how the reforms will impact service providers who have been operating in good faith throughout the country.

From South Korea to Australia, HRM Asia delves into the specific issues keeping HR awake at night in key Asia-Pacific markets. Check out all the other HR country reports here.