Perspectives

Read your Employment Contract for your life!

By August 2, 2021 No Comments

Here in the Philippines, we pride ourselves on being honest, trustworthy, and ethical. As such, we tend to assume the people we interact with and the companies we work for have our best interests in mind. Most of the time we rely on verbal agreements. Even when we lend money to someone, a verbal agreement gets the job done. Most of us are not really a huge believer in written contracts, even knowing that it makes us unaware of the future consequences that might lay ahead. So, when you are excited to start a new job and the employer who so graciously hired you sends you a long employment contract you simply sign the contract right away out of excitement. But the million-dollar question is, did you read what you just signed?

When it comes to applying for or accepting a new job, you can’t just rely on assumptions and verbal agreements anymore. Historically, employers in the Philippines have had immense power over the employee in employment negotiations. By leveraging this power, employers have been able to put demands on new employees that unfairly limit their ability to grow as professionals. But times have changed. Employees now have more power in employment negotiations yet the power dynamic has remained unchanged with companies sticking to their unfair practices. I’ve been working as an HR in the industry for quite some time now. I’ve seen it all. My friends and family look at me as their walking encyclopedia when it comes to matters relating to employment contracts. Of course, I do my part in guiding them but sometimes they ask advice when it’s already too late because they’ve already signed. Contracts in general may seem to be the most boring document in the world to read, especially when you’re so excited to start a new job. As they say, you should “grab the opportunity right in front of you!” and while that’s true, the best way to go is to hold hands with the opportunity, get to know it, and when you’re totally convinced, then and ONLY then do you commit to it. Yes, your employment contract is just as serious as getting married.

Throughout the years, I’ve made a list of issues that made me want to cringe at employment contracts that obviously didn’t know the second tenet of the Four-way test— Is it fair to all of those concerned? As a head of Human Resources, you may think that I am pro-management, which I am, but it does not mean I will lead at the expense of others. And that is why there is this thing called an “Employer – Employee Agreement”. A contract wherein both the employer and the employee have mutually agreed on the rules of engagement. Aside from looking at your paygrade, here are many things you should know before signing your contract.

The employment contract

There are many types of employment contracts presented in job offerings. It could be probationary, regular, project-based, or whatever they call it nowadays. The type of contract usually determines the tenure an applicant will have in the company. For the basics, you should make sure that these following items are presented clearly in the contract:

  1. Deductions of Mandatory Benefits such as SSS, PHIC, HDMF & Taxes
  2. Salary per month, day or project
  3. Frequency of payment release (e.g. weekly, semi-monthly, monthly, end date of the project)
  4. Allowances per month, if available, should be clearly stated. (Bonus: you can ask if the amount is taxable or not)
  5. Working arrangements (e.g. 5 days a week with 2 days off, 6 days a week with 1 day-off, shift, start date)
  6. Position in the company
  7. Termination or movement process depending on the type of contract.
  8. Moonlighting
  9. Other benefits, if applicable (e.g. paid leaves, HMO, parking, shuttle service)

Training bonds

Training bonds became popular when BPO companies started to rise here in the Philippines. This was back when not too many Filipinos had experience working in multinational companies. The BPOs agreed to train local employees and in exchange for that training the companies wanted a dedicated work-force. There was a high supply of jobs and a lot of applicants had the opportunity to apply which made training costs for companies really high. The training program bond was created to make sure applicants don’t just leave in the middle of or right after the training given. Should they attempt to leave, there will be penalties given to them as stated in their training bonds. This is a sensible tradeoff for a company willing to hire unskilled and untrained labor.

Training bonds are also present in some arrangements with existing employees. Some companies include training clauses in their employment contracts, especially when the skill needed for a job is highly specialized. In some companies, they have the employee sign a separate contract for training to further enhance their skill set. In exchange, they have to comply with the employment duration that comes along with their training bond. Usually, a training bond’s cost depends on the kind of training provided. The costs only go higher when training provided is not available locally and the company needs you to travel to other areas to get the training.

The problem is that nowadays many companies abuse the concept of training bonds as employees have simply become accustomed to agree to such for practically any job. Companies sometimes claim that their way is a bit different and thus warrants a bond but the reality is that EVERY company is different and it’s not real training the employee is getting in return. Ask yourself, are the skills that I will learn of value to any employer and my career moving forward, OR is the training simply valuable to this one employer? If you are learning something new that can advance your career, then sure maybe it’s a fair trade to accept the bond terms, but if it’s nothing more than understanding the internal procedures of one company then that is just corporate orientation and not valuable personal professional development. Training bonds have become quite rampant unfortunately, and a lot of employees do not understand why these exist. You should take the time to ask, identify what VALUE you are going to be learning, then clarify major concerns of a training bond especially if the duration of the bond is too long and you don’t see yourself working in that company for a huge amount of time. Signing a training bond blindly might cause you major penalties in the end. Just remember the main things to look out for in training bonds are the value of training, the duration, cost, and termination clauses

Incentive programs

Some companies include clauses of incentive programs to keep employees motivated. Incentive programs are created to encourage employees to work hard and meet or sometimes exceed their goals. Most incentive programs are earned (e.g. Loyalty, bonus, spot awards, attendance) which means there shouldn’t be a condition attached to them. They are a form of recognition of hard work and are usually performance-based rewards.

Other incentive programs such as profit-sharing or gain-sharing plans may also occur. These are the payments that could be directly or indirectly be given on top of your regular salary. It might be a bit complicated but basically, what is offered to the employee is usually something that they have already earned throughout their years of working with the company. There just might be some arrangements made if the employee chooses to terminate their contract.

In sales, some companies provide incentives such as a percentage of the total sales if the employee meets their quota for the month.

Another example is a sign up bonus as an incentive which is given as a reward to a candidate who signs-up with the company. Some companies release this on an installment basis due to possible cash flow issues, and some on your first paycheck. Whether you complete 3 or 6 months with them, you should receive the one time promised amount to you when you signed up.

Some companies subtly give out incentives with a catch so don’t celebrate just yet!

In the advent of catchy advertisements and the magic of word play, the word “incentive” nowadays is used to attract talent and sometimes these come with preposterous terms and conditions. I have encountered a travel incentive offered to an employee that turned out to be more of a longevity benefit. Terms and conditions were definitely targeted to make a person stay longer and it just so happens that the benefit is to avail travel allowance. A lot of millennials were very attracted to travel incentives that BPO’s started to make this part of their package but it was really the fine print of the terms and conditions that would tell you what it’s really about.

Some terms and conditions such as “reimbursing the company for a used incentive when you resign” are a few of the things an employee should be wary of. I personally don’t believe that earned incentives should have conditions. It’s supposed to be the carrot to drive motivation and not the stick.

NDAs/ Confidentiality agreements

Non-confidentiality agreements (NDA) are meant to legally protect all ideas, information and anything confidential that belongs to your employer. This is to ensure that no sensitive information goes outside the company. These types of contracts are solely for the protection of the employer and its clients. Employees often fail to acknowledge that these contracts are important to uphold because if disregarded, they could cost the company’s credibility and sometimes including the client’s.

In short, NDAs are not something you need to be too concerned about so long as you aren’t taking business information from one company and sharing it with another. The key element you should look for is the duration of the agreement. 2-3 years if preferable but 5 can be common. Anything more might raise an eyebrow. It’s best if the NDA is mutual to protect yourself as well but you won’t have much control over this. In the end, you may have no ability to negotiate the NDA. The good news, that they don’t want you to know, is that they are almost impossible to enforce in a court of law (again, if you are sharing trade secrets with another company you will be prosecuted).

Termination Clause

When you are ready to advance your career and move on to a better position with a new company, you will need to tender your resignation at your current job. It’s only then that many employees learn how long their termination notice period is. The time frame was always there in the employment contract they signed many years ago but the employee never paid attention to it until it was their time to leave. This is another common place where employers attempt to lock people into a dead-end job and make it difficult for employees to leave for better jobs. Assessing penalties or just making it unnecessarily difficult to quit is a cheap tactic that puts the employee in a bad position. Not to mention requiring more than what the law states is onerous. Companies that lock in their employees for more than 30 days is definitely considered unfair labor practice. Having new employees sign onerous contracts just says much about the company and its values. Pay close attention to this and be active in negotiating a fair notice duration. Thirty days is the advance notice a resigning employee can provide an employer to look for a replacement and it is company prerogative to allow the resignee to leave earlier than the notice they have given.

I guess managers should also get enough training to realize that the 30-day notice is just a good gesture provided by the resigning employee to manage whatever turnover is required. Once the resigning employee is done doing their turnover then it’s time to LET THEM GO. There is no reason to hold the employee for the whole duration of the notice when they are done doing the turnover.

If you think about it, if the company lets go of the employee earlier than the notice date it saves the company on paying further salary and the resigned employee happily starts with their new employer. It’s basically a win-win situation for both parties.

Final Advice

Employers suing employees is not really a trend in the Philippines, still, I suggest you don’t take chances on the possibility that it might happen given that there is an existing contract signed by both parties. Take the time to read your contracts thoroughly even though it appears to be boring. Read it twice or even more. If there are certain things that you want to be changed, try to negotiate with your employer. If the employer refuses to negotiate, this might be the best time for you to seriously reconsider them as an employer. DO YOU REALLY WANT TO WORK for a company that is determined to hold power over your career like that? The best way to avoid regretting signing contracts is really to read. So, read for your life!

Abby

About Abby