International Human Resource

Management Guide To

THE PHILIPPINES

Roneal JitMichael CorbettAhmad MardaYvette Jaquez

Joe Huang

IHRM Guide to The Philippines• Host Country Profile: Philippines

• Parent Country Profile: United States

• US-Philippines Cultural Gap Analysis

• Company Case Study: Ford Motor Co.

• IHRM Issues

• Role of IHRM in Cross Cultural Ethical Issues and Corporate Social Responsibility

Country Profile: Republic of the

Philippines

Area: 300,000 sq. km. (117,187 sq. mi.).

Capital: ManilaTerrain: Islands, 65% mountainous,

with narrow coastal lowlands.Climate: Tropical.

Geography

Population (2000 census): 76.5 million. Government’s estimate for 2003: 82.0 million

Annual growth rate: 2.36%.Ethnic groups: Malay, Chinese.

Religions: Catholic 85%, Protestant 9%, Muslim 5%, Buddhist and other 1%.

Languages: Tagalog, English, language of government and instruction in education.

Education: .Literacy: 92.3%.

Life expectancy ( 2003): 67.2 yrs. for males; 72.5 yrs. for females.

Work force ( 2003): 34.6 million. Services (including commerce and government): 48%; agriculture:

36%; industry: 16%.

People

Type: Republic.Independence: 1946.

Constitution: February 11, 1987.Suffrage: Universal, but not compulsory, at age

18.

Government

Home Country Profile:United States

• Economic & Military Super Power

• Characteristics of Americans:• Independent• Straight Forward• Value Time

• Current Issues• Outsourcing

Cultural Gap Analysis: US-Philippines

• Shared History

• Institutions

• Family Values

• Education

• Work Norms

Ford Motor Company

• History and Business Profile

• Mass Production

• Globalization

• Company Financial

IHRM ISSUES

Target Country: PhilippinesParent Country: USCompany: Ford Motor Co.

ASEAN Ford

• Confidence• Economic• Employee• Environment• Growth

IHRM & Ford

• Compensation & Recognition• Staffing• Development• Cultural Gap

MAP

• “The skillful management of people turns out to be the most critical single ingredient to helping business survive & excel…”

“People Vision”

• Continued Education• Awareness• Empowerment• Open-Book• Responsibility• Efficient Communication

• Increased Productivity & Utilization

• 1991- 10%• Today- 64% & 70%

Export Production

The BIG Picture

• Employers Confederation of the Philippines (EcoP)

• Social Leadership• Human Resource Development• “Big Brother – Small Brother”

An Outsider’s Opinion

• Expatriates rank Philippines #2• Friendly Attitude• Education• Housing• Health Care• Sporting & Recreation

Role of IHRM in Cross Cultural Ethical

Issues & Corporate Social

Responsibility

Corporate Social Responsibility

• Definition and Scope• Globalization Effect • Legal issues

• Home Country• Host Country• International Standard

5 Stages of Corporate Responsibility

• Defensive• Compliance• Managerial• Strategic • Civil

Human Resources Training and Stages of Social issues

• Latent• Emerging • Consolidating• Institutionalization

The Philippines

• Political Environment• Social Environment• Economic Condition• Labor Practices

Corporate Strategy and Responsibility

• Economics • Social • Markets• Outsourcing

Fair Pay / Fair LaborWork Conditions

Special Economic Zones (SEZ)

• Ford Philippines Assembly Plant • No. 1 American Road, Greenfield Automotive Park,

Special Economic Zone, Sta. Rosa, Laguna, Philippines 4026

• Zones are a key role in attracting new investors to the country

• Tax incentives• Low corporate income tax rates• Indirect access to governmental administrative services• Minimum government influence• Administers their own economic, financial, industrial and

tourism development

Areas of Investments

The SEZ

• Abuse in the SEZ• Many industries using extralegal methods are

successful in preventing the formation of unions• Poor working conditions

• Ford Motor Co. • Keeping their workforce happy to avoid unionization• Provide sufficient benefits and rights to the trained

workforce

Labor Force• 1996 Labor Code

• Allow all private and public sectors workers with the exception of the military and police, to freely associate and to form or join a union

• Forced labor is prohibited by the Constitution, but bonded labor of children known to occur

• Children in the labor force• Approximately 3.7 million children are economically active• At least 2 million are working in hazardous condition• Can work at the age of 12 with parental consent• Can not work more than 6 hours a day and can not work at night

Cont.

• Standard workweek• 48 hours for most industries• 40 hours for government workers• Work beyond 8 hours in any given day requires

payment of 125 percent the regular wage• No limit on overtime hours• Must have 1 day of rest per week

LABOR FORCE STATISTICS INDICATOR     2004   2005p

Household Population 15 Years Old and Over (000)     52,675   53,975

     Labor Force (000)     35,447   35,664

          Employed (000)     31,547   31,634

               Less than 40 Hours (part-time) (000)   11,095   11,323

               40 Hours and Over (full-time) (000)   20,028   19,814

               Did not work during the Past Week (000) 423   496

               Mean Weekly Hours Worked   41.9   NA

               Underemployed (000)     5,522   5,098

          Unemployed (000)     3,900   4,030

               Mean Weeks Looking for Work   7.9   NA

Labor Force Participation Rate (%)     67.3   66.1

Employment Rate (%)     89   88.7

     Underemployment Rate (as % of Employed)   17.5   16.1

Unemployment Rate (%)     11   11.3

Note:  Details may not add up to totals due to rounding, p  Preliminary, NA  Not available.

Source of data:  National Statistics Office, Labor Force Survey.

Wages

• Minimum wage• Established in 1950, based on democratic principles• Wage boards set minimum rates in each of the

country’s 15 administrative regions• Local prices, rates of inflation, need to attract

manufacturing investment, and economic stability of the region

Cont.

Currency Conversion Results

http://finance.yahoo.com/currency/convert?amt=1&from=USD&to=PHP&submit=Convert

Symbol U.S. DollarExchange

RatePhilippine Peso

USDPHP=X 1 Apr 29 54.000 54.000

Category Computation (in Pesos)

OT Work on Regular Day 125% * Rate/Hour

OT work during Rest Day or Special Public Holiday   First 8 hours   In excess of the 1st 8 hours 130% * Rate/Hour

130% * Rate/Hour+30% of(130% of Rate/Hour)

OT work on Special Public Holiday falling on employee’s rest day   First 8 hours   In excess of the 1st 8 hours

150% * Rate/Hour150% * Rate/Hour+30% of(150% of Rate/Hour)

OT work on Regular Holiday   First 8 hours   In excess of the 1st 8 hours

200% of Rate/Hour 200% of Rate/Hour + 30% of (200% of Rate/Hour)

OT work on Rest Day falling on a Regular Holiday    First 8 hours   In excess of the 1st 8 hours 260% of Rate/Hour

260% of Rate/Hour + 30% of (260% of Rate?Hour)

Source: Department of Labor and Employment (http://www.dole.gov.ph)

Family Income and Expenditures

INDICATOR     2000   2003

     Average Family Income     145,121   130,604

     Average Family Expenditures     118,839   109,988

     Average Family Savings     26,282   20,615

Source of data:  National Statistics Office (NSO), 2003 Family Income and Expenditures Survey (Preliminary Results).

MANDATORY EMPLOYMENT CONTRIBUTION

13th Month Pay By law, companies are required to give its employees a 13th pay equivalent to one (1) month salary.

Social Security Systems (SSS) Contributions

As mandated by law, both employer and employees are to contribute for the social security benefits of the employees in accordance with the following schedule:

Union

• The Constitution and the Labor Code guarantee workers’ rights to self-organization.

• Common in the manufacturing sectors• Secure a labor contract from the employer• Defines the rights and duties of • Covers wages, hours of work and working conditions

Regions Daily Minimum Wage RatesNon-Agriculture Industries*

(in Pesos/day) - As of September 2004

Metro Manila) private sector workers & employees Wage Order # NCR 10 (July 10, 2004) private sector workers and employees

P 300.00

CAR (Cordillera Autonomous Region) P 205.00

Region I P 175.00

Region II P 193.00

Region III P 243.50

Region IV P 237.00

Region V P 194.00

Region VI P 190.00

Region VII P 208.00

Source: Department of Labor and Employment (http://www.dole.gov.ph)Note: Wage per region inclusive of COLA / ECOLA (which rates varies per region).

Cont.

INDICATOR     2003   2004 p

Existing Unions     16,091   16,724

     Membership (000)     1,517   1,572

Existing Collective Bargaining Agreements (CBAs)     2,842   2,798

     Workers Covered (000)     556   555

Sources of data:   Bureau of Labor Relations, Statistical and Performance Reporting System (SPRS) (2003).

Work Conditions

 • Labor Laws (Based on U.S)

 • 40 hour work week • Safe & Healthy Work environment • Paid Vacation • Minimum wage $4.55 for non-agriculture, $2.45

for Agriculture • Child Labor, 16 is the minimum working age by

law.

Conclusion

• Philippines and IHRM• Historic and Cultural Ties• Adoption of American Standards and Norms

• Role of IHRM • in Cross Cultural Ethical Issues and Corporate Social

Responsibility