Friday, January 26, 2018

Part Time Life is the New Normal

A recent article from the Wall Street Journal reveals that the world’s biggest employers no longer sell things but rent workers. What this means really is that in the last two decades—basically my entire working life—the traditional employers and business hand over their tasks to “non-employees,” considered mere “talents” or “service providers” who are given lower pay and receive fewer or no benefits. 

According to the article by Lauren Weber: “For employers, dispatching work to outside companies saves money and lets them access skills they need without adding to their headcount. Workers in jobs that have gone to outsourcers, though, can feel moved around like chess pieces, either displaced entirely or re-badged as employees of a service provider, sometimes with fewer benefits and lower pay. A growing body of economic research suggests that outsourcing is a significant factor fueling the rise of income inequality in the past decade.”

This has happened in both industries I’ve worked in, even in government.

You’re considered lucky if you gain a contract that’s renewable every year, still subject for approval, and instead of a salary you are given what is considered “retainer’s fees.” If the project you’re working on does not make it to the finish line and or is shelved for some reason or another, then you would only get paid for that pilot and a “development fee” for everything else you worked for in the last year and a half. If the project gets aired, then you hope it runs for as long as it can. Otherwise, you get only the minimum of and get paid for 13-16 weeks. 

Then back to development hell. It’s possible that you or your group of creatives don’t get another project, in which case you are floating and hoping to get a slot in another team, which is harder because there are a lot of people who do not have active projects and hoping to get that “extra” revolving, free for all slot. It's feast or famine, boom or bust. This is mainly the reason why I decided to leave and go back to that other industry. 

Where I work now, the practice is that the bulk of the force is comprised of part-timers. Like in my current office, there are less than ten full timers (FTF) and over a dozen or so part-timers (PTF). A PTF carries the same maximum work load as an FTF, but the rates are half of what a full timer gets, no benefits and no healthcare— although you have the option to get it as part of the collective and pay for it yourself as a salary deductible over 3 months or so. 

If circumstances dictate that less part-timers are needed, then we get less load. Current circumstances in this industry dictate that there will be less load in the next 3-4 years or until 2021-22, with this year and 2019 being the hardest hit. In my other previous non-employer (the College of Rich Kids, aka Cork), you don’t even get to know if you’ll get a workload until the very first day of work. So if you’ve been counting on that and get nothing, well good luck. It’s for this reason that a lof of part-timers work at more than one job—sometimes as many as three or four. 

My current non-employer manages things a bit differently. CNE makes sure that all the PTFs will have work, even at a reduced load. Most of the PTFs are farmed off to another area of the industry, which is not what we're trained for, but gives us work that will sustain us through these lean years

You are not an employee, and who you work for is not your employer. Yet you do regular time, you follow their rules. Everywhere in the world, this is the game now. The part time outsourced life is the new normal. 

Wednesday, January 3, 2018

Preparing for retirement with PERA

In a previous post, I looked at how the TRAIN would affect my take home pay. 

TRAIN promises to cut the withholding tax. From my previous effective rate of 32%, it will go down to ~9.2%. That savings will go a long way to fund my retirement. So while it might be tempting to use that "free" money to live the best life now, I'm opting to invest it for my best life in the future. 

Although I contribute to the SSS--it is mandatory, after all--I'm giving it the side eye. For one, there's the talk that the SSS assets would be depleted in 28 years if crucial reforms are not implemented. Which means the SSS is possibly not  around by the time I'm retiring. So I thought I should prepare for that bleak future scenario. At any rate, no one should be counting on just the government pension. I mean, the minimum pension right now is pegged at Php1,200. Who could live with just that money? 

Anyway, I was still working in government when the PERA law was approved in 2008, but implementation is another matter. There was buzz in 2016 that it would go live, and it did in December 2016. But the only two approved entities--BDO and BPI--only had mentions of it but no actual product yet. 

Even before the approval of the TRAIN, I was already thinking of seriously saving for retirement. In the international (mostly American) finance blog circles, it's all about ETFs or index funds. So I was looking at index funds. And then I thought of PERA to at least get a 5% tax credit for saving.  

I made inquiries with BPI already. I knew from other posts that one has to go to the head office to open a PERA account. However, when I checked with the BPI website, this FAQ states that starting January 2017, there should be several branches aside the main office that could facilitate opening a PERA account. I went to my local branch to ask if that policy had changed. The girl at the accounts desk called the head office to confirm and to ask for the requirements as well. 

This is how you open a PERA account with BPI: 
  1. Yes, you need to go to BPI's main office in Makati. Go to the 17th floor, Assets Management. 
  2. You need to bring your TIN ID. In the event that you don't have an ID, bring your ITR as it would have details they need to open a PERA account. 
  3. You must have a BPI savings or checking account. 
  4. a valid government ID. 
  5. Fill up their form, which gauges your investment risk profile 
BPI offers 4 kinds of PERA accounts, which are very similar to mutual fund or UITF offerings. They have a money market, government bonds, corporate bonds and an equity fund. 

Of course, there are fees: BPI asks for a 1% administrator fee based on the amount contributed. There are also "transactional and annual fees from the Cash Custodian as well as trust fees from the respective PERA UITFs." The Equity Fund lists a 1.5% per annum trust fee. I wonder if this is the same as or probably on top of the 1% admin fee. 

Meanwhile, BDO's PERA Equity Index Fund lists a 1% p.a. "management fee." Again, will need to clarify if this is on top of or the same as the admin fee. But I still need to inquire with BDO.  

If we go by fees alone, I'm partial to whoever is offering a lower fee. Then there's the matter of who offers an index fund. There's also the ease of transacting. BDO is attached to my payroll account, that would make it easier for me to transact. That matter of only having one administrator for your PERA accounts certainly has to be considered. 

All in all, I still need to check with BDO and then weigh which one between the two banks will get my retirement money. But even then, BSP Deputy Governor Espenilla acknowledges that the slow rollout is because there are only ~100 professionals dealing with PERA.  It would certainly give the investing public more breadth of choices if other entities would come in and offer their own PERA funds. Until that day comes, it's a coin toss between these two candidates. 

Tuesday, January 2, 2018

How to Ride the TRAIN with reservations

The gift that keeps on giving. You do you, Alma. 

The first part of the Tax Reform for Acceleration and Inclusion (TRAIN) was signed into law in December of last year. Its main selling point was that those earning Php250k annually will no longer have to pay the income tax. While a lot of people find this a cause for celebration. 

Like Alma Moreno, I still have my own reservations about this whole exercise. I do recognize that we will have a bigger take home pay, but I also know that we will be taxed in other ways. Like the price of anything that uses oil or sugar will surely go up. Hello, fare hikes and no more unli-softdrinks. (Not that I'm a big fan of soda, anyway.) 

But I want to look at this positively, so I want to focus on how the TRAIN will make our take home pay bigger. Every year around tax time, I just grind my teeth at how much tax the government takes away. I mean, it's fine if you see that social services are efficient or that government officials are competent. Just knowing that your tax money goes to someone else's already deep pockets and yours are butas, that's just a major bummer. 

In the pre-TRAIN tax regime, I get taxed ~25-32% because I am single, have no dependents, and earn from multiple compensation. A part timer is only allowed a maximum of 12 hours a week. So if I work for 4.5 hours a day, I only get 3 hours because the 1.5 is already eaten up by taxes. Your payslip may show that you get a sizeable amount, but the reality of what shows up in your ATM is another matter. A third of your salary is no laughing matter. Because in a year, that amount balloons to more than 6 digits. Monthly, it's enough to pay an amortization for a condo or a house. But in reality, I can't even qualify yet for a housing loan--I'm a part timer, and my salary is under 50k. So yes, a bummer. 

Photo courtesy of ABS-CBN reporter Alvin Elchico. 

In the new TRAIN Revised Withholding Tax Table, my income category falls under the 30k + 25% of the excess over 400k. Which means roughly my annual income tax will now fall under 50k, which is a whopping reduction coming from around 3x that amount. From a condo amortization, pambayad na lang ng parking---kung may kotse ako. Eh wala so nganga. Hahaha. 

But seriously, if the tax computation table is indeed true, that is an additional 7k or so to the monthly take home pay. 

What to do with this "free" TRAIN money? 

Not going to spend it on #travelgoals, that's for sure. Will most likely funnel it into a retirement account, aka the long delayed PERA. 

As for which entity and fund, that will come in another post.