Anxiety Escalates as 13th Month Pay Loans Out and Employers are being Clueless Where the Funds will Go

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The government has introduced a scheme to help finance small businesses 13th month payout, but companies worry the loan conditions are not enticing enough for distressed businesses that can spend the capital elsewhere or simply want to close down entirely.

To date, some 21,000 micro, small and medium-sized enterprises (MSMEs) have received funding under the COVID-19 Assistance to Restart Enterprises (CARES) Program of the Trade Department.

Loans worth P1 billion were given to 16,270 businesses, while another 4,814 firms approved for assistance would receive approximately P200 million by next week. To support 70,000 MSMEs, CARES has a cumulative budget of P10 billion. In view of this, Sergio Ortiz-Luis, president of the Employers Confederation of the Philippines (ECOP), a business association, shared that it would not be ideal to use CARES as a facility to finance holiday benefits, while the assistance was welcome.

CARES, as it is, is a relief scheme for MSMEs disadvantaged by the health crisis, which ensures that funds lent by the facility will be used for anything from supporting business activities to the procurement of new equipment and, in this situation, workers pay their 13th month pay benefits as required by statute before December 24.

This versatility is a problem. Worse though CARES money is interest-free, for loans due within 1 to 4 years, the government charges hefty service fees ranging from 4 percent to 8 percent. The longer the payment period, the bigger the payments are.

On the other hand, ECOP was the one who recommended that the government lend funds to MSMEs to ensure that cash-strapped firms would afford the mandated bonus to their workers. The plan comes after the labor department requested economic managers to help small businesses unable to fund payouts for the 13th month, equal to 1 month of compensation for workers with at least 1 year of service.

For the labor community, Kilusang Mayo Uno, subsidies rather than loans should be extended by the state to MSMEs. The party has recommended that the proposed P11 billion 2021 budget be re-channelled to the contentious National Task Force on Resolving Local Communist Armed Struggle for that reason. However, this will not be achieved because the national outlay next year is already being deliberated.

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