Institutionalizing WFH policy in the country

THe Philippines is considered a powerhouse in the business process outsourcing (BPO) industry. Filipino call center agents are among the best when it comes to work ethics and professionalism. With hundreds of established companies in the country, the BPO industry is seen posting annual growth rates of 7 percent to 9 percent in the short term. This makes it one of the fastest-growing industries in the Philippines.

The information technology and business processing management (IT-BPM) sector helped keep the Philippine economy afloat during the pandemic. On top of giving jobs to 1.44 million Filipinos, the sector contributed around P320 billion monthly to the economy, according to the Philippine Economic Zone Authority. That’s because PEZA allowed registered business enterprises in the IT-BPM sector to adopt work-from-home arrangements, a pre-emptive measure against the spread of Covid.

With the reopening of the economy, IT-BPM companies are facing a dilemma. They can’t afford to lose generous tax perks that hinged on compliance with requirements to have staff on-site, but they also do not want to lose talented staff who value the freedom of remote work.

IT-BPM employees have been asking authorities to make the WFH arrangement permanent, which is allegedly not allowed under the CREATE Law. After working from home for more than two years now, these employees are reluctant to go back to their offices. And sources said that some IT-BPM companies are willing to bear the brunt of penalties rather than increase attrition by forcing their employees to return to office.

The American Chamber of Commerce of the Philippines (Amcham) said it is pushing for the amendment of the Philippine Economic Zone Authority Law to allow Peza-registered business enterprises (RBES) to adopt a permanent WFH arrangement. Amcham Executive Director Ebb Hinchliffe told reporters at the sidelines of the recent Arangkada Forum press briefing that the “usual suspects” in terms of attracting foreign direct investments are high energy cost, labor cost, ease of doing business, and corruption (Read, “Amcham backs PEZA law revision,” in the Businessmirror, December 5, 2022).

Hinchliffe put the spotlight on the issue of paper transfer of registration from PEZA to BOI to adopt up to 100 percent WFH arrangement, noting that all members of the foreign chambers in the Philippines are dealing with this issue. “We’re a little concerned...i think all of our members are dealing with the current BOI versus PEZA issue because that’s a big one—the WFH issue. One of my priorities is to get the PEZA law, [Corporate Recovery and Tax incentives for Enterprises] CREATE Act revised so that it allows WFH… that’s a very top priority.”

He said the Amcham is pushing for the amendment of the PEZA law “absolutely as fast, as hard as we can” to put a stop to the “continued rift” on the work-fromhome arrangement. “The current investors here… the BPO industry in particular are saying ‘ok that won’t affect the manufacturing, it only affects financial service companies and they want work from home, and the law won’t allow it.’”

Under Fiscal Incentives Review Board Resolution 026-22, RBES in the IT-BPM sector that have remaining incentives under Section 311 of the National Internal Revenue Code of 1997, as amended by the CREATE Act, or those with approved incentives under the CREATE Act on or before September 14, 2022, may opt to transfer their registration to BOI to implement up to 100 percent WFH. The resolution said an RBE contemplating transferring its registration to BOI must file a request with its concerned investment promotion agency (IPA) on or before December 31, 2022.

However, according to the Department of Trade and Industry Memorandum Circular 22-19, those who did not exercise the option to register with the BOI shall be covered by Section 309 of CREATE, which states: “A qualified registered project or activity under an Investment Promotion Agency administering an economic zone or freeport shall be exclusively conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered.”

While BOI is not affected by zone limits, Hinchliffe cited the advantages of being a Peza-registered business enterprise. “The best plus for PEZA is dealing with the local government units. BOI does not deal with LGUS. PEZA does. And so that relationship is a must.”

The Philippines can leverage sustainable trade practices to attract foreign investment and, more importantly, retain current investors. As cited by Amcham and the Peza-based IT-BPM companies, there’s an urgent need to amend the PEZA law, particularly to institutionalize the work-from-home policy with incentives so that the BOI and PEZA are put on equal footing.