How Cost-Effective Is Offshoring Talent to The Philippines?

Even before remote work became the new normal, outsourcing has been one of the most lucrative industries in the Philippines. Businesses turn to remote HR partners in the country in search of the best talents to fill key positions in their company, especially when they are working with a limited budget. 

70% of American companies cite cost savings as a primary reason for outsourcing. Likewise, 38% of these companies report up to 40% reduced costs. 

Cost savings is one of the major reasons why foreign companies outsource specific services to the Philippines. Businesses can save up to 60% on employee costs including payroll, benefits, healthcare, and management, as per Scotsman. 

This article indicates how much a business can save by offshoring talents to the Philippines. 

How Competitive Are the Labor Costs in the Philippines? 

According to the Philippine Statistics Authority, a family of five needs a minimum of USD 4,150 per year or USD 345 per month to cover food and non-food essentials. This alone gives a broad overview of how inexpensive the cost of living is in the Philippines. 

Manila Bulletin reveals that on average, BPO companies in the Philippines charge USD 8-16 per hour for their services, as compared to the hourly rates being charged by companies in the US which are USD 24-32 per hour, USD 25 to 35 per hour in Western Europe, or Australia at USD 28 to 40 per hour. This makes the Philippines the most cost-efficient option among these competing countries. 

The cost of outsourcing varies from USD 500 to 2700 a month, depending on their roles. In general, foreign companies can easily expand their businesses and save up to 80% on specific teams and roles when outsourced to the Philippines. Saving a substantial portion of your resources and redirecting them to revenue-generating activities of your business brings nothing but better results and optimized growth. 

Likewise, the Philippine government also entices foreign companies to outsource and invest in the country by offering incentives such as tax holidays and reductions. These contribute to an even lower cost of hiring in the Philippines. 

Employee Benefit Costs 

Apart from monthly wages, Filipino employees are entitled to the following: 

• 13th Month Pay – Filipino workers receive a bonus at the end of each year. This is equal to 1/12 of their base salary and is pro-rated on how many months the employee worked in the company. 

• Night Shift Differential Pay – Most foreign companies require Filipino talents to work at night to match their time zones. Employees who are put through graveyard shifts or from 10 PM to 6 AM are entitled to a night-shift differential amounting to 10% of their hourly rate. 

• Government-Mandated / Social Welfare Benefits – Employers, whether local or foreign, are required to shoulder a portion of their employee’s contribution to the Philippine Social Security System, Pag-IBIG (the Home Development Mutual Fund), as well as to the PhilHealth or the Philippine Health Insurance Corporation. 

Talent Acquisition Costs 

Maintaining the monthly cost of an employee is just on top of the cost of acquiring them. Apart from the time and energy an in-house recruitment team puts into identifying the candidates for your business, there is also the cost of establishing an effective recruitment strategy to entice the right talents to apply. 

HR offshoring partners offer quality talent acquisition strategies that will bring the right people to your company at a fraction of the price. The Society for Human Resource Management reveals that the most recent average cost per hire in the United States is USD 4,700. The same study also states that the total cost of onboarding a new team member can be at least three to four times the position’s salary. 

The modest hiring costs in the Philippines have allowed HR partners to offer their talent acquisition services at up to 60% savings. Such substantial cost reductions can be reallocated for the growth and business development of their companies. 

Related: Build Your Dream Team With Filipino Talent

Training Costs

On average, a company spends at least USD 1,280 per employee for training and skills development, according to the 2022 State of the Industry report. In 2020, a 7% increase in training and development was seen, as companies continued to incorporate new sets of learnings to make managers adept at managing fully remote or hybrid teams. 

The goal of every business is to minimize the cost of training and talent development through offshoring top-tier professionals. eduMe reports that in Europe, small-scale businesses with only 19 employees spend only 1.5% of labor costs on training, while in Australia, only one-third of small firms provide skills development to their employees. 

When you hire from the Philippines, training and skills development are already part of the onboarding process developed by your chosen offshoring partner. They create an effective transition plan to ensure that the candidate is up to the challenges of the role and is equipped with the necessary expertise. 

Employee Retention Costs 

The shift from the work-centric to the people-centric approach of most HR partners is brought about by the change in the priorities of workers. Today, professionals value the work environment, culture, and their ability to balance work and life more than the money they get for working. 

Through outsourcing to the Philippines, foreign companies are sure that their Filipino team members are treated with respect, and are given an equal opportunity to grow and maximize their potential by bringing their authentic selves to work. By this, they save not only time in filling abandoned positions due to bad management but also money spent on talent acquisition. 

Why is Offshoring More Cost-Efficient Than the Other Options? 

Now that we have established how cost-effective it is to offshore staff to the Philippines, let us discover why offshoring is the most sustainable choice among other similar business practices like outsourcing, nearshoring, and onshoring. 

While the closest business model to offshoring is outsourcing, the former goes beyond what outsourcing can offer in terms of the level of control it gives to business owners over their operations and the quality of work. With offshoring, businesses can directly handpick talents and manage them. 

Nearshoring and onshoring, on the other hand, may somehow entail hiring limitations, especially for hard-to-fill roles. This leaves offshoring as the most viable and cost-effective option when it comes to scaling one’s business. Limitless global opportunities are at hand with offshoring. 

Read also: Nearshoring, Offshoring, and Onshoring: How Do They Work?

Final Thoughts

Cost-effectiveness has become one of the major advantages of offshore staffing to the Philippines. This is of course, apart from the fact that the country produces a highly skilled workforce annually whose expertise varies from HR management, accounting, content production, graphic design, and more. 

Likewise, Filipino workers are a cut above the rest in terms of cultural adaptability due to their affinity to Western ways and their innate resourcefulness. 

If you want to upscale your business with top-tier talents but work only within a budget, the Philippines is certainly the way to go. Still having second thoughts on how practical offshore staffing to the Philippines is? Find out how much you can save per role when you choose to offshore to the Philippines through this salary calculator.