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A Guide for BPOs as Legitimate Contractors in the Philippines
Legitimate Contractors

Understanding DO 174: A Guide for BPOs as Legitimate Contractors in the Philippines

DO 174 represents a significant step towards promoting fair labor practices and protecting the rights of workers in the Philippines. For legitimate contractors, compliance with its provisions is essential not only for legal adherence but also for upholding ethical standards and fostering sustainable business growth. 

Business Process Outsourcing 

Business Process Outsourcing (BPO) companies are expert entities that have honed the skill of delegating a diverse range of business operations and responsibilities to external service providers. These encompass customer service, technical support, sales, marketing, data entry, human resources, and other vital non-core functions crucial for a business’s seamless operation.

What is DO 174?

Department Order (DO) 174, issued by the Philippines’ Department of Labor and Employment (DOLE), provides guidelines for the employment of workers in the contracting and subcontracting industry. This order aims to ensure the rights and welfare of workers engaged in these arrangements.

Although Business Process Outsourcing companies (BPOs) in the Philippines are not typically engaged in traditional contracting or subcontracting activities related to construction or similar industries, they provide business process outsourcing services, such as customer support, IT services, and back-office operations. In cases where BPOs provide services for clients in the Philippines, they may be required to be registered as legitimate contractors pursuant to DO 174.  

Key Provisions of DO 174

  1. Registration and Compliance Requirements. Legitimate contractors are required to register with DOLE and comply with various documentary and financial requirements to ensure their capacity to engage in labor contracting.
  2. Prohibition of Labor-only Contracting. DO 174 strictly prohibits labor-only contracting, wherein the contractor merely recruits, supplies, or places workers to perform jobs for a principal, who exercises control and supervision over them. This provision aims to prevent the circumvention of workers’ rights and evade legal obligations.
  3. Job Contracting Guidelines. Legitimate contractors engaging in job contracting must ensure that they have substantial capital and necessary licenses and permits. They should also assume responsibility for the payment of wages, social security, and other benefits due to their workers.
  4. Joint and Solidary Liability. Both the contractor and the principal are held jointly and solidarily liable for any violation of labor standards, including non-payment of wages, benefits, and social protection. This provision encourages principals to exercise due diligence in selecting contractors and ensures that workers receive just compensation and benefits.
  5. Compliance Monitoring. DOLE conducts regular inspections and audits to monitor compliance with DO 174. Legitimate contractors are expected to maintain accurate records of their workforce, financial transactions, and labor standards compliance.

Implications for Legitimate Contractors

For legitimate contractors, compliance with DO 174 is not merely a legal obligation but also a strategic decision. By adhering to the provisions of DO 174, contractors can:

  • Enhance their reputation and credibility in the industry by demonstrating a commitment to fair labor practices and compliance with regulations.
  • Minimize the risk of legal disputes, penalties, and sanctions resulting from non-compliance with labor standards.
  • Attract and retain skilled workers who are increasingly discerning about the companies they work for and the labor conditions they accept.
  • Build stronger partnerships with principals who prioritize ethical and responsible business practices, thereby securing long-term contracts and collaborations.

Allow Us to Help You With Registering Your Entity as a Legitimate Contractor

For details on registration under DO 174, please feel free to contact us. Our consultants will assist in registering your business as a Legitimate Contractor.

Frequently Asked Questions

What is Business Process Outsourcing?

Business Process Outsourcing (BPO) companies excel in delegating a wide array of business operations to external service providers.

Author

  • Atty. Esther Perez

    Atty. Esther Lauren Perez serves as the Legal Compliance Director at InCorp Philippines. She assists clients with legal compliance for business and product registration, corporate housekeeping, due diligence, and other related matters.



    View all posts


What is DO 174?

Department Order (DO) 174, issued by the Philippines’ Department of Labor and Employment (DOLE), sets forth employment guidelines for workers in the contracting and subcontracting industry.

Author

  • Atty. Esther Perez

    Atty. Esther Lauren Perez serves as the Legal Compliance Director at InCorp Philippines. She assists clients with legal compliance for business and product registration, corporate housekeeping, due diligence, and other related matters.



    View all posts


What are the key provisions of DO 174?

The key provisions of DO 174 include Registration and Compliance Requirements, Prohibition of Labor-only Contracting, Job Contracting Guidelines, Joint and Solidary Liability, and Compliance Monitoring.

Author

  • Atty. Esther Perez

    Atty. Esther Lauren Perez serves as the Legal Compliance Director at InCorp Philippines. She assists clients with legal compliance for business and product registration, corporate housekeeping, due diligence, and other related matters.



    View all posts


Author

  • Atty. Esther Perez

    Atty. Esther Lauren Perez serves as the Legal Compliance Director at InCorp Philippines. She assists clients with legal compliance for business and product registration, corporate housekeeping, due diligence, and other related matters.

    View all posts

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