The cost of outsourcing varies widely depending on several factors. These include the nature of the job, the level of expertise required, the outsourcing location, and the complexity of the tasks. Outsourcing to the Philippines can lead to significant cost savings for companies, particularly in labor expenses.
Businesses can save up to 70% on labor costs by utilising offshore providers in the Philippines. This substantial reduction in expenses comes from the lower cost of living and the competitive salaries in the country, which, despite being attractive for Filipino workers, are lower than those in many Western countries.
The Current Outsourcing Filipino Market
Outsourcing has become a significant part of the Philippine economy. In 2021, even as many traditional businesses were closing their doors, the BPO sector was able to generate $25 billion in revenue according to Sen. Grace Poe. This highlights the strength and adaptability of the Filipino workforce during difficult times.
Building on this resilience, the industry saw further growth in 2022, achieving a total revenue of $32.5 billion. This was an increase of over 10% from the previous year, surpassing the government’s expectations. The continued success of the outsourcing industry underscores its vital role in the economic growth of the Philippines.
While we don’t yet have the figures for 2023, the future looks bright for the outsourcing industry’s growth. According to a 2023 survey from SEEK Asia, 74% of Filipinos are in favor of either hybrid or fully remote work setups. In contrast, only 26% are keen on returning to the office full-time.
The pandemic has effectively demonstrated that many roles can be successfully carried out from home, often leading to even better productivity outcomes. Given this shift towards more flexible work environments, it’s reasonable to expect that the outsourcing sector will continue to expand, adapting to these new preferences for how and where work can be done.
Cost Structure for Outsourcing Services in the Philippines
The cost structure for outsourcing services in the Philippines involves several key components, including labor costs, service fees, government-mandated benefits, and potential savings when compared to domestic operations. Labor costs vary based on the skill level of the workforce, with roles ranging from entry-level positions to expert professionals.
For instance, if you’re a US or Australian business owner looking to outsource, an entry-level data entry specialist might cost between $2-3 ($3-4 AUD) on the lower end and $6-10 ($7-11 AUD) on average, while technical support agents could range from $9 to $25 ($10-26 AUD) per hour, depending on their expertise.
But the story doesn’t stop there, government-mandated benefits in the Philippines include the 13th-month pay, night differential pay, contributions to the Social Security System (SSS), Home Development Mutual Fund (Pag-IBIG), and the Philippine Health Insurance Corporation (PhilHealth).
These benefits are designed to provide workers with additional income, savings, and healthcare support, adding 15-20% to the cost of outsourcing but this ensures that the workforce can cater to the needs of their families and themselves. (considering the family-centric culture of Filipinos).
On the employer’s side, companies considering outsourcing to the Philippines can expect significant savings, often ranging from 70-90% in wage payouts compared to domestic costs. This cost efficiency is primarily due to the lower minimum wage in the Philippines, offset by the country’s lower cost of living.
Factors That Would Affect Costs When Outsourcing
We already know how outsourcing can be a great way to access specialised skills, reduce costs, and improve efficiency, but it’s crucial to understand the factors that impact your costs before diving in. Here are some key elements to consider:
Scope and Complexity of the Project
This plays a significant role in determining your overall cost. Simple, well-defined projects will incur lower costs than intricate, multifaceted ones. For example, expect to pay more for custom software development ($15-45 USD/hour) compared to data entry ($5-10 USD/hour).
Required Skills and Expertise
Highly specialised skills like senior software engineers ($20-30 USD/hour) will command higher rates than entry-level virtual assistants ($4-8 USD/hour). Consider conducting a skills gap analysis to assess your project’s needs and meet your budget.
Project Duration
Short-term projects often incur higher hourly rates to compensate for recruitment and onboarding costs. Long-term engagements, conversely, may offer discounted rates due to the established relationship and familiarity with your project.
Training
If your project requires specific training for outsourced personnel, factor in the associated costs. Training can range from a few hundred to several thousand dollars, depending on the complexity and duration. It’s crucial to weigh the initial training expense against the long-term benefits of a skilled workforce.
So What Are You Waiting For?
The Philippines’ talent pool and competitive rates offer a compelling opportunity to optimise your budget and achieve your business goals. But navigating the cost landscape requires careful planning and informed decision-making.
That’s where The Outsourcer comes in. We are your trusted partner in unlocking the Philippines’ outsourcing potential. With our expertise, we can help you:
- Define your project scope and requirements with laser focus.
- Connect you with the perfect expert based on your needs and budget.
- Negotiate competitive rates and manage all aspects of your outsourced project.
- Ensure seamless communication and collaboration between your team and your outsourced workforce.
Contact The Outsourcer today for a free consultation, and let’s turn your outsourcing dreams into a cost-effective reality!