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Outsourcing work to the Philippines is always an excellent option for small to mid-sized companies that aim to get the most bang out of their buck. The country’s low labor cost is always a point of interest for people who are looking to expand their operations. Compared to professionals based in developed countries like the USA and UK, professionals in the Philippines earn a much lower annual salary—sometimes even 70% to 90% less—despite having the same responsibilities. That may sound like it’s a bad thing, but it’s not; it’s actually a win-win situation for both the company and the outsourced labor force.
It’s only natural to wonder why a competitive workforce that’s fluent in English can be hired for pennies on the dollar. Rest assured, this is not because of exploitation or modern-day slavery. These reprehensible acts are still practiced in many places around the globe, but the BPO industry in the Philippines has taken a solid stance against these and actively supports practices that will provide employees with good working conditions and decent wages.
There are many reasons why employers can afford to pay out—and employees in the Philippines can sufficiently live with—salary that is the equivalent of USD 300 per month. Here are a few to begin with:
Low Cost Of Living
A developing nation in the Southeast Asian region, the Philippines has one of the lowest cost of living among its neighbors. According to the Philippine Statistics Authority or PSA, a family of 5 needs at least PHP 8,778 a month or the equivalent of USD 168 to meet their most basic food and nonfood needs. This information was gathered in 2015, but it can still apply to the present day. This means that for the average Filipino family, it can be possible to live comfortably month by month at USD 300.
In another 2015 survey conducted by the PSA, it was revealed that a Filipino family typically spends USD 4,150 per year or USD 345 every month. In comparison, the minimum wage in the country is equivalent to more than USD 9 per day or around USD 207 per 21-day work month, which isn’t exactly enough compared to the average annual family spending. However, it should be noted that a large majority of the jobs offered in the BPO industry pay above the minimum wage and provide employees with health benefits and various allowances. The decent starting salary afforded by a job in the industry is enough to give workers peace of mind, allow them to save up money for emergencies and for investments, and pursue hobbies and interests.
A Strong Sense of Family
Filipinos value family. Children are expected to live with their parents until they get married, and it’s not unusual to see multiple generations of a family living under the same roof. Upon graduation, children are expected to help support the rest of the family and care for their parents after the latter have retired.
The high value that an individual places on the family plays a crucial role in the workplace. The need to ease the financial burden of the family motivates most employees to keep their job and perform well. This brings us to the next point:
Massive Influx of Young Workers Every Year
After graduating, Filipino students immediately seek employment as soon as possible to support their families. This ensures a yearly influx of 500,000 fresh graduates who are willing to join the workforce, many of whom have received training in the field of information technology and communication.
The national government, in coordination with BPO industry stakeholders and educational institutions, has continually pushed universities and colleges to offer courses that will prepare students for a career in BPO. In addition, many educational institutions also offer affordable short term courses for those who want to work in the industry but don’t have the means to pursue a 4- or 5-year college degree.
At the end of every school year, many graduates and certificate holders alike apply to BPO companies, particularly those that are based in cities. Some companies based in more rural areas may be a little pressed to expand their workforce, but the intensive educational and skills training programs offered by the government and various BPO organizations in these areas may just change that scenario in the next few years.
Fear of Poverty
A developing country will always have some form of rampant poverty present within its borders, and the Philippines is no exception. With nearly 10 million families in the country considering themselves poor, it’s a serious problem.
Despite this – or perhaps, because of it – Filipino workers work hard. To escape from poverty, to provide their families with essentials, and to afford their siblings the chance to make something better for themselves, they apply themselves to their work.
Of course, there are also driven individuals in the workforce who wish to advance in their careers and be recognized for their talents and the effort they put into improving their skills and making their processes more efficient. This mindset comes into play when they gladly accept the workload that’s been given to them without complaint or sass. They keep their eyes on the prize even if the work is challenging, repetitive, or stressful – and this is true with many outsourced business processes, such as technical or customer support.
A USD $300 Salary for the Filipino BPO Employee is NOT Slavery
For a Filipino worker, a USD 300 monthly salary is not slavery. Depending on the job at hand, of course, it can be a pretty decent amount that is enough to sustain a good way of life and afford more than the essential needs of a family. This amount is a far cry from the monthly minimum wage of USD 168, which some people argue can be too small to provide a family with nutritious food and cover rent, transportation, utilities, and school and other expenses within the same span of time. A USD 300 salary is almost double the amount of the monthly minimum, enough to ensure that a household has sufficient funds to cover its needs and then some.
The extra money that don’t go toward paying the expenses can be put in a savings account. It can even be used in furthering the employee’s education, turning them into another asset for the company and giving them a better chance to improve their lives.
How does an average Filipino household spend money?
A 2015 PSA survey provides a brief but valuable insight as to how families spend the money they earn every year. The highest earners and spenders are families based in the National Capital Region, which earn USD 8,209 and spend USD 6,219 on the average every year. This is followed by families based in the Cordillera Administrative Region, which earn and spend an average of USD 5,447 and USD 3,921 every year. The lowest earners and spenders are based in the Autonomous Region in Muslim Mindanao. They take home a total of USD 2,685 and spend USD 1,719 annually.
According to the survey, 41.9% of the money goes to food, 12.19% goes to house rental, 7.91% is used to pay for utilities like water and electricity, 6.34% is spent on miscellaneous expenses, and 6.21% is spent on transportation. Education expenses takes up 3.76% of the budget; health is at 3.70%; other expenses at 3.09%; special occasion spending at 2.55%; durable equipment, perhaps for house repairs, is at 2.54%; and footwear and clothing expenses at 2.46% and 2.44% per year.
Here’s a breakdown of how an average family that earns a base salary of USD 300 per month or USD 3,600 per year normally spends money:
Expense % allocation Annual amount in USD Monthly amount in USD Food 41.9 $1,508.40 $125.70 House rent 12.19 $438.84 $36.57 Utilities 7.91 $284.76 $23.73 Miscellaneous 6.34 $ 228.24 $19.02 Transportation 6.21 $223.56 $18.63 Education 3.76 $135.36 $11.28 Health 3.7 $133.20 $11.10 Other expenses 3.09 $111.24 $9.27 Special occasion 2.55 $91.80 $7.65 Durable equipment 2.54 $91.44 $7.62 Footwear 2.46 $88.56 $7.38 Clothing 2.44 $87.84 $7.32
Hiring a Filipino workforce is a win-win choice for both your company and the Philippine-based BPO company, freelancer, or consultant that you are working with. It allows your company to increase its bottom line and give decent work and wages to employees in the Philippines, as well as promote good working conditions in the BPO industry in the country. That’s not slavery at all; that’s empowerment.
As such, companies looking to outsource their business processes in the Philippines should not let themselves be hampered by any sort of misplaced guilt or hesitation. If you’re ready to go ahead and leave your doubts behind, get in touch with us at Outsource Accelerator and we’ll get you started.
For a better picture of how incomes and salaries work in the Philippines, check out our very own guide in the matter. You can also see how the typical Filipino employee’s salaries compare to those in the UK, US, and Australia here.