So, you’re considering outsourcing HR services? Good choice! It’s a choice nearly half of businesses worldwide have made as 42% of companies have already outsourced at least one HR function, and for good reason.
With a reported ROI of 191% and a number of other significant business advantages, it’s no wonder more and more businesses are now opting for an outsourced HR department (or at least parts of it through outsourced payroll processing, talent management, and employee engagement among others).
As in every business decision, it’s understandable if the whole idea may seem overwhelming at first. That’s just how it is when a business owner or manager is looking at things that will largely impact the company they’ve put a lot of time and effort into. Since there are a lot of things to consider when working with an HR outsourcing provider, it’s natural to feel like you’re not sure how to start.
But you’re here. You’re in the right place. You’ve already gotten the business to a point where the need to scale is imminent because your team is growing — now it’s time to support that growth with the right HR team (and cost-effectively at that).
In this blog, we’ll walk you through the process of outsourcing HR services to the Philippines, breaking it down into a clear, actionable 5-step guide that you can follow as you build an offshore team to empower your team with dependable human resource management.
Read on to learn more.
What Are HR Services & Why Are They Outsourced?
Human Resources (HR) services pertain to any type of support in human resource management provided by a third party. The objective is to help organizations enhance their human resource management, such as by enhancing operational efficiency, improving compliance with regulations, boosting employee satisfaction and retention, and more.
Since there are a lot of functions that HR teams have to handle including, but not limited to payroll processing, benefits administration, monitoring of staff productivity, minimizing employee turnover rates, and maintaining overall company culture, having a good human resource management is key to the success of any organization. It ensures that companies have great talent, that employees are engaged and performing, and that the company is a great place to work overall.
However, not all organizations have the resources to staff their own in-house human resources team, hence more companies are choosing to outsource HR services.
<br>The growing popularity of HR outsourcing services or human resource outsourcing (HRO) is reflected in the size of the global human resource outsourcing market, which was sized at $18.65 billion in 2023, estimated to be $19.97 billion in 2024. And with a 7.59% annual growth, the market size is expected to reach $31.14 billion in 2030. In short, it’s a fast-growing multi-billion dollar industry geared towards empowering businesses as employment trends shift and HR responsibilities evolve alongside them.
Not only is human resource outsourcing a great option for those looking to optimize resources, it’s also a great way to unburden one’s inhouse team. Running human resource operations effectively requires expertise in several areas such as compliance and risk management, compensation and benefits, health and safety, and more. Sourcing these expertise and delegating various HR administrative tasks can be challenging. And with the added burden of needing to scale operations, companies choose to outsource their human resource functions rather than operate it in-house.
Why Do Companies Outsource HR Services To The Philippines?
With so many HR outsourcing companies globally, the Philippines is emerging as one of the leading destinations mainly for its lower labor costs, excellent English, cultural compatibility, and excellent track record in the business process outsourcing (BPO) industry.
- Lower Labor Costs
When people think of the Philippines, the first thing that comes to mind is cost savings. This is because the Philippines is a developing country with a lower cost of living, hence lower labor costs. To illustrate, the average hourly wage of an HR specialist in the United States in 2024 is $36, meanwhile, it costs ₱144 (approx. $2.46) per hour in the Philippines. Such cost-effective rates make outsourcing HR services ideal for businesses of all sizes: be that a small business looking for payroll processing support or a multinational organization that needs to hire global HR staff.
With such a huge difference, even with the additional costs that come with management, resources, and benefits, the overall cost to outsource HR services to the Philippines is still around 70% lower than hiring a full-time staff onshore in the United States. This appeals to many global companies attracting them to outsource to HR outsourcing companies in the Philippines.
- Excellent English
When it comes to outsourcing, smooth collaboration is key to success and even more so in HR outsourcing where you’ll have an offshore team handling HR tasks that mostly involve communicating with staff. And Filipinos are known for their excellent English communication skills, what with the country ranking 2nd in English proficiency across all of Asia and English being used as the primary language in Philippine education. These result in the majority of Filipinos speaking excellent English, making the Philippines particularly attractive as an outsourcing destination to native English speaking countries, like the United States, UK, and Australia, contributing to the high demand for HR outsourcing in the Philippines.
- Cultural Compatibility
Besides communicating well in English, Filipinos are also culturally similar to developed nations, particularly, the United States. This is because they were a United States colony for 48 years, and because they consume so much American pop culture. For this reason, Filipinos have an easier time understanding nuances in North American culture (as well as technical requirements such as regulatory compliance and employment law), aiding communication and resulting in better collaboration. Such compatibility is especially helpful in HR responsibilities since people-related tasks, as well as the overall company culture, are on the line.
- Good Reputation in BPO
The history of Philippine business process outsourcing (BPO) industry dates as far back as the 1990s. This puts the Philippines ahead of many other nations in the outsourcing market. With decades of head start, the Philippines has built a strong reputation as a reliable outsourcing market with reliable tech infrastructure, government incentives, and over 800 BPO companies. This gives many global companies the confidence to work with Philippine BPO agencies, trusting their expertise and experience for high quality HR services. This also means that you’ll be entrusting your HR tasks to a fully-trained team backed by well-developed outsourcing infrastructure and strong government support.
With all these benefits considered, there really is no doubt that choosing an HR outsourcing service provider from the Philippines is the best move for businesses looking to scale with more efficient task delegation and cost-effective HR solutions.
How Do You Outsource HR Services To The Philippines?
If you’ve never outsourced before, you may be unsure as to how you can start outsourcing human resource services to the Philippines. We’ve broken down the steps to outsource HR services to the Philippines in 5 easy steps below! We also created a separate guide on the best practices for outsourcing human resources.
Step 1: Assess Your HR Needs
Before starting any business venture, such as outsourcing, first evaluate your current operations and determine your HR needs. Are you finding it difficult to find staff for your HR positions? Does the volume of HR work not justify hiring staff full time? Do you expect fluctuations in your HR operations that would require you to scale quickly? The key here is strategic planning tailored to your business’ actual needs — this will benefit your outsourcing partnership in the long run.
After clarifying your needs, consider the benefits of outsourcing your HR functions to the Philippines. With the geographic distance, collaboration will be done virtually. Will you be able to operate without HR staff on-site? How about cultural and language compatibility? While Filipinos have built a reputation for working well with Western brands, there are still brands that require a local HR manager and other HR staff. Will this be an issue for you?
Finalize and keep all these in mind as it will be crucial throughout the journey of finding an HR outsourcing provider.
Step 2: Determine HR Roles To Outsource
Once you’re certain that outsourcing to the Philippines is the right business strategy for your HR operations, the next step is to identify which HR roles you need to outsource. The most commonly outsourced ones include general HR, compensation and benefits, payroll, training and development, and recruitment. There are also businesses that opt to outsource their entire HR department from the Philippines to address all of their HR needs.
Then, Determine how many of each HR role you need, and of which seniority. Are there particular skills you require for these employees and specialists? Will they need to know how to use proprietary tools like Workday, Bamboo HR, and Zenefits? Or do you need an end-to-end, holistic HR outsourcing service with a team that can handle all HR tasks mentioned above? Be clear on these as you’ll use these this information when shortlisting the BPO companies you want to work with.
Step 3: Choose A BPO Company
With clear roles to outsource and skills required, it’s time to choose a BPO company that specializes in HR services in the Philippines. The easiest way is to start with the top HR companies in the Philippines, then select based on your unique needs.
Assess the outsourcing companies based on their expertise, track record, contract type, timeline, and costs. And while it’s not a technical requirement, checking the company culture of the provider is also important in finding the right match when it comes to outsourcing.
It’s best to work with an HR outsourcing company that has provided outsourced HR services to companies similar to yours in terms of size, industry, and geographic location. This reduces the learning curve, easing transition and minimizing operational disruptions.
You also want to consider the contract type when choosing a company to work with. You may need full-time offshore staff for long-term or you may need them to fullfill one off projects only. Depending on the outsourcing arrangement you need, the length of contract or terms, and the costs will determine the best company to work with.
A quick way to assess these is to meet with these companies and discuss how they may meet your requirements, and on what costs and terms. If you need assistance or guidance with this assessment, you may set up a quick consult here.
Step 4: Discuss Terms & Conditions
Once you’ve decided to work with an outsourcing partner, it’s time to discuss the terms and conditions of the human resources outsourcing services they provide. Though these should have already been brought up during initial discussions when choosing your outsourcing partner, you should discuss these more thoroughly within the context of a working partnership with your chosen BPO company.
Some of the things you want to pay close attention to include scope of service, service level agreements (SLAs), key performance indicators (KPIs), confidentiality and data protection, compliance with local and international laws, contract duration and renewal terms, termination clauses, dispute resolution mechanism, responsibilities and liabilities, quality assurance (QA) measures, communication protocols, HR technology & software, and change management process.
Step 5: Transition & Onboard Your Offshore HR Team
Once you’ve signed the contract, your partner BPO company will be recruiting, hiring, vetting, and training your offshore HR team to ensure they meet your requirements. Once this is done, they’ll be onboarded, equipped with tools to fulfill your tasks, as well as taught your process and given access to your systems to help them integrate into your operations.
With your offshore HR team onboarded, it’s time to work with them, with your outsourcing partner managing your offshore team on your behalf to ensure quality of work, and that their efforts align with your business objectives. From there, it will be an ongoing process of continuously growing with an offshore team that effectively serves as an extension of your existing in-house one. Your HR outsourcing partner will provide the assistance you need throughout the process.
Now, you’re ready to outsource your HR function.
We’ve covered the complete journey of outsourcing HR services to the Philippines, a five-step, proven strategy adopted by major global businesses.
By following these five steps, you can empower your team with an HR team that can truly support your business with where you are right now (and towards the direction you’re headed in the future).
It’s time to take the first step and transform your HR function into a strategic asset for business growth — are you ready?
Outsource HR Services to the Philippines with KDCI.
Outsourcing HR services to the Philippines for the best results shouldn’t be difficult.
With clear goals, the right outsourcing partner, and great collaboration and communication, you can expect great results!
At KDCI Outsourcing, we’ve supported several brands, from SMEs and startups to multinationals, with their human resource functions. With over a decade in the industry, we’ve built a strong reputation for building the best offshore teams in the Philippines. We don’t just find people with the experience and skills you need, we look for people who mesh well with your team, making it so that your outsourced team feels inhouse, helping you achieve your business goals.
Learn more about HR outsourcing in the Philippines. Contact us today!
