Pros and Cons of Philippines Outsourcing Explored

Posted on:
March 10, 2020
min read
Table of Contents
What are the benefits of outsourcing to developing countries?
What are the challenges of outsourcing to developing countries?
Top 5 Most In-demand Developing Countries for Outsourcing
What are some successful examples of companies that have outsourced to developing countries?
What are the best practices for outsourcing to developing countries?
Pros and Cons of Philippines Outsourcing Explored
KDCI Outsourcing
September 6, 2023

A quick research of good offshore staffing countries will lead you to several articles pointing to the Philippines — one of the top BPO providers in the world. The country has long been established as a key player in the outsourcing industry, along with India, Brazil, and Eastern Europe.However, as with all things, there are benefits and drawbacks to outsourcing to the Philippines, and we made a quick list to help you think it over.

Advantages of Outsourcing to the Philippines

BPO is a government supported industry

1. Above Average to Native-level English Proficiency

First advantage of outsourcing to the Philippines is the country' English proficiency. One of the major concerns of some companies when it comes to offshoring is the language barrier. Luckily, unlike outsourcing to countries like Ukraine, China, or Thailand, you will hardly ever experience this with Filipinos.According to EF English Proficiency Index, the Philippines ranks 20th out of 100 countries/regions and 2nd in Asia. So, if you are planning on outsourcing to the Philippines, it won’t be difficult at all to work and collaborate seamlessly. You’ll have strong communicators who you can understand, have discussions with, and resolve issues with a lot easier than accents and other things language barriers may present.

2. Exceptional Understanding of Western Culture

Another benefit of outsourcing to the Philippines is that the country has a good understanding of Western culture. The US colonized the country for 48 years, from 1898 to 1946, before the US recognized the independence of the Philippines. After that, some Americans chose to stay in the Philippines, while the country itself held strong ties with the US, which greatly influenced the culture of the Filipinos.This led to Filipinos adopting Western culture, including food, language, education, and religious freedom.

3. Strong and Highly Diverse Talent Pool

A diverse pool of talents is the third advantage of outsourcing to the Philippines. Philippine universities churn out thousands of highly capable workers yearly, leading to a large and diverse talent pool. They produce over 700 thousand graduates, most of which are qualified and capable of handling work for you.In terms of technological competency, according to the Philippine Statistics Authority, the Philippines currently has over 37 million Filipino millennials, with a median age of 25.7 years old. A demographic familiar with technology and is capable of understanding it to improve businesses.

4. Cost-effective Labor

Depending on which state you live in, the US has a higher cost of living — housing, utilities, healthcare, food, and taxes — compared to the Philippines.According to Statista, the average US citizen would need between 58K to 99K USD per year, while the average Filipino citizen can live comfortably with between 9.6K to 14.5K USD per year. Therefore, statistically, you will always have to pay more for local talent compared to outsourced talent.The reason behind this difference is the currency movement and current economic gains of PHP being weak compared to USD. At the time of writing (March 3, 2020), the exchange rate of PHP to USD is 50.79 PHP to 1 USD, making employment costs lower than in first world countries. For this reason, outsourcing to the Philippines is one of the top choice that businesses consider.Read more about how much it costs to outsource to the Philippines.

5. Security, Flexibility, and Scalability

Fifth advantage of outsourcing to the Philippines is the country's security, flexibility, and scalability. While you can technically DIY an offshore team, the most secure way in outsourcing to the Philippines is still through a company like us. We work as your business partner, and hence we are flexible in terms of developing effective, customized provisions that work for you. We’ll talk about your business, your goals and objectives and recommend the best course of action.On top of that, outsourcing allows you to scale your team without additional infrastructure costs. You have the freedom to expand your team, depending on what kind work and workload your business needs at the moment.

6. BPO Is a Government-supported Industry

The Philippine Council for Industry, Energy, and Emerging Technology Research and Development (PCIEERD) has been working towards providing training programs to train BPO workers since 2013.eLearning solutions like the Learning English Application for Pinoys help senior high school students and college students prepare to meet the BPO demands after graduation.Moreover, the IBPAP, an organization solely dedicated to improving the IT-BPM industry in the Philippines focuses on innovation and getting government support for enabling the IT-BPM industry in the Philippines.IBPAP works to continuously further and maintain global competitiveness by getting the country to provide higher-value services. This allows Filipinos to remain efficient even with AI and automation.One of the objectives of multiple government initiatives is to elevate the proficiency of Filipino laborers, enabling companies outsourcing to the Philippines to flourish and expand.

7. Hard Work Is in Their Culture

The family-centered culture of the Filipinos complements their hardworking attitude. They have an innate want to support their families and to give them a more comfortable life, which ultimately becomes their reason to work harder. They have a lot more riding in the fact that they are employed and are supported by their employerHowever, as a new generation of Millennials and Gen Z’s enter the Filipino workforce, the value for work-life balance also becomes essential. Hence, you might have to coax them into working overtime or working during weekends if you really need them to.Businesses are not only getting the best out of outsourcing to the Philippines but they are also able to provide opportunities to millions of  Filipinos.

8. Less Management Tasks

By outsourcing to the Philippines, you can reduce the number of management tasks you need to handle, which can enable you to concentrate on your core responsibilities more effectively. Choosing to partner with outsourcing agencies like KDCI means you have an offshore Human Resource and management team who will help manage your team. We take care of handling employee attendance, tax headaches, leave reporting, and many more.Additionally, while you have full control over your team, you can also choose to have us hire a project lead for training and team management. All you have to do now is check on them from time to time, or read reports while you focus on other aspects of your business.

Disadvantages of Outsourcing to the Philippines

1. The Weather

On the other hand, one of the disadvantages of outsourcing to the Philippines is its changing weather conditions. The Philippines is a tropical archipelago resting just in the West side of the Pacific Ocean. They experience an average of 20 storms that can cause power interruptions and cancelation of work and school in flood-prone areas within a typhoon’s path.Moreover, being within the Pacific Ring of Fire means they experience earthquakes and volcanic eruptions. On average, they feel about 100 earthquakes per year and, while they have 53 active volcanoes, they rarely experience eruptions.Fortunately, Filipinos are more than capable of handling remote work. Some outsourcing companies like KDCI also give the option to work from home. This is how we maintain business continuity in case of natural disasters.

2. Holidays

Compared to the US (11 official holidays), the Philippines has a total of 18 official non-working government and religious holidays.  Thus, businesses planning on outsourcing to the Philippines may also want to consider this factor.With the Philippine population being predominantly Christian, a lot of culturally important holidays are officially deemed as holidays by the government.However, employers are allowed to ask their employees to come to work. Hence, we rest this in our client’s discretion, as Philippine labor laws mandate that employees get paid more when they work during legal holidays.

3. Pro-employee Labor Code

Businesses that are planning on outsourcing to the Philippines should take note of the country's labor code. An employer cannot fire an employee at will in the Philippines. A justifiable cause and proper documentation are required to terminate any Philippine employee.Termination of any employee also requires that the company provide the allocated severance pay. However, labor codes that favor employees do lead to significantly lower turnover rates.

4. 13th-month and 14th-month Pay

The Philippine labor code requires organizations in the Philippines to pay employees an additional 13th month and 14th month pay annually.This incremental month of payment is paid in December as a mandatory bonus to employees and is done to show concern for the plight of the Filipino working masses.

5. Bad Rep

Every country and race have stereotypes, and the Filipinos are no exemption. Some foreign companies who planned on outsourcing to the Philippines and tried to DIY their offshore teams have had poor experiences with hiring Filipino talent.Because of the DIY-ing, they were more prone to hiring a less capable demographic, which led to generalizations that Filipinos are lazy or incompetent. Hence, to avoid this experience, put your trust on outsourcing agencies so that you hire quality talent and have proper HR to take care of them.

diverse talent pool of philippines

One of the Top Outsourcing Companies in the Philippines: KDCI

Bad traits aren’t exclusive to any country. However, with KDCI, our teams actively work towards turning our weaknesses into strengths and uphold the pros that are intrinsic in our work ethic.This breeds a culture of reliability and professionalism with our partners who trust to provide expertise in Offshore Staffing, Creative Process, and Ecommerce Services. Our clients who took the leap to work with us now have their operations up by efficient and custom KDCI teams who take their businesses further.Contact us today to learn how you too can take your business further.

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