Outsourcing Philippines: A Guide for Businesses

The Philippines is not only home to one of the world’s warmest and most welcoming people, but also home to the many wonders of nature.

From lush green forests to colossal cave networks, underground rivers to white sand beaches, huge mountain ranges and sprawling colorful living reefs, the “Pearl of the Orient” is a biodiversity hotspot.

Just south of Luzon, the Verde Island passage, a million-hectare marine ecosystem teeming with life that most scientists call the “the center of marine shore fish biodiversity in the world.”

Up north lies the 2,000-year-old ancient wonder: the Banaue Rice Terraces, the handiwork of the mighty Ifugao tribe, handed from one generation to the next, based on their sacred traditions.

Stretching across the Philippines’ largest island of Luzon is 1.4 million hectares of forest landscape inside the Sierra Madre Mountain Ranges.

On the western side of Luzon, two UNESCO natural heritage sites: the Puerto Princesa Underground River National Park and the Tubbataha Reefs Natural Park.

Among the world-famous natural wonders to explore in the Philippines are the following:
· Hundred Islands in Pangasinan
· The Seven Lakes of San Pablo, Laguna
· Palawan’s Under Ground River
· El Nido Palawan’s lagoons
· Tubbataha Reefs
· Puerto Galera white sand beaches
· Boracay Island’s white-sand beaches
· Siargao surf spot
· Tinuy-An Falls, the Philippines’ “Little Niagra”
· Mt. Apo, the Philippines’ tallest mountain

The Filipinos have a mixed heritage with deep Malay, Chinese, Hindu, Arab, Polynesian roots before the Spanish, American, and Japanese people came.

Pre-Hispanic Philippines was a major destination for the traveling Chinese and Arab merchants, bringing along with their products a piece of their culture.

Aside from many successful Filipino-Chinese (Chinoy) families here, the Philippines is home to the oldest Chinatown in the world, located in Binondo, Manila.

The Arabs also made a big influence in Southern Philippines where they converted natives to Islam. These natives, who named themselves “Moro,” thrived on the great island of Mindanao.

Centuries later, the Spanish came and ruled for over 300 years, permanently embedding a large part of their culture to the natives.

In fact, the name “Philippines” and “Filipino” came from the Spanish explorers who named the archipelago from the ruling monarch at that time, King Philip II.

After centuries of Spanish rule, the Americans and Japanese came, bringing along a whole new culture and system. The Philippines only gained full independence from the US in 1946, making it a relatively young republic.

With all the cultural mix-and-match in the Philippines, it’s easy to find someone bearing a name that carries all these influences, like “John Robert Yap Dela Cruz” or “Anna Maria Chua.”

Their diverse ancestry and cultural heritage make Filipinos very adaptable people when it comes to working with foreigners.

One of the defining traits of Filipinos is their resiliency, the capability to pick themselves up, recover, and build back better, and the overall climate and weather systems may have something to do with it.

Located on the rims of the Pacific Ocean, the Philippines sits along the so-called “Pacific Ring of Fire,” a group of islands with a lot of active volcanoes.

Out of the 300 volcanoes in the Philippines, 22 are active, with the most recent eruption recorded just last January 2020 in Taal, a couple of hours of drive time away from Manila.

Aside from that, strong typhoons have frequently visited the Philippines over time, averaging at least 20 typhoons a year.

The strongest typhoons usually hit the Philippines between September and December, but due to the changing climates, some powerful storms still hit the southern part of the country in January.

Centuries of living with typhoons and volcanoes have shaped Filipino resiliency, the ability to get up once again after being battered by so many challenges in life.

But it’s not just all rains and ashfall in the Philippines. It’s just a part of the country’s 2-season cycle, as the dry season drops a brilliant ray of sunshine the rest of the year, peaking in March until April.

With the sun shining bright in these months, it is everybody’s favorite time to hit the beaches and explore all the beautiful islands of the country has to offer.

If the natural disasters shaped their resilience, the bright Philippine sun of the dry season certainly cultivated the Filipinos hopefulness, optimism, and warmth.

Because of its archipelagic nature, the Philippines is a multilingual state with Filipino as the national language and English as the official second language.

The Filipino language is generally considered as a standardized version of the Tagalog language mainly spoken in Metro Manila, Southern Tagalog, and parts of Central Luzon.

However, Filipino is technically a national language composed of over 200 local and native languages spoken in different parts of the country.

Meanwhile, English, an official language in the Philippines since the 1930s, has been thought in Filipino schools for decades now, replacing the Spanish language.

It has been widely used throughout the country that even public signs and business communications throughout the country are usually in English, making it very familiar and friendly for expats to roam around or do business.

The multilingual nature of Filipinos makes them very adaptable to any foreign language, which is an asset for any organization planning to expand to different parts of the globe.

Filipinos, aside from their cultural heritage, also have diverse religious groups. While being predominantly Catholic, there are also a lot of Christian sects, little Buddhist groups, and many Muslims especially in the south.

The strong faith of Filipinos is in full display during the Holy Week, when most streets are half-empty, and shops are closed because people are either busy praying at home or out there visiting multiple churches.

One tradition in Pampanga even has some faithful literally whipping their backs or nailed on a cross in an act of penance during Good Friday.

Filipinos also venerate the saints and archangels in town “Fiestas,” annual festivals with different traditions such as dancing and processions.

Town fiestas in honor of the saints and archangels are big in the Philippines, especially in the provinces. During this period, people would shed out money, prepare good food, and invite visitors from other villages or even towns.

For Filipino Muslims, the end of the Holy Month of Ramadan is very sacred and is usually declared as a holiday when the nation joins Filipino Muslims in their prayer and celebration.

Filipinos love celebrations. Aside from the many fiestas all year long, they also love to celebrate almost every milestone in life.

May it be birthdays, baptismal rites, graduations, first pay, “monthsaries” and anniversaries, house blessings, reunions, welcome home parties, Filipinos always find unique ways to celebrate.

Weddings, in particular, are big in the Philippines. With usually at least 100 people in attendance, the union of one couple easily becomes a whole village’s celebration.

Even commemorating a deceased loved one can become a reunion of sorts during All Soul’s Day in November, when families troop to the cemeteries bringing food and drink to remember the dead.

To some extent, holidays may still count as a celebration as Filipinos love to spend most of the 18 national holidays out of town with friends and family, just to celebrate life.

A staple in almost every Filipino celebration is karaoke. Filipinos love to sing their hearts out, whether they are in tune or not.

Sometimes, Filipinos do not even need a grand celebration to sing. Karaoke on a regular Friday afternoon is as normal as it comes.

Perhaps, one of the most popular things about Filipinos is their long Christmas celebration, which usually starts as early as September.

By this time, Christmas songs would already play in every radio station, malls would be launching a series of holiday sales, and people would already decorate their households with Christmas trees and lights.

The way Filipinos celebrate every milestone or event in life only proves that they are warm, welcoming, and generally positive people.

Filipino celebrations are never complete without family because for people in the Philippines, family is always on top of the list of things that matter.

The culture in the Philippines places a big emphasis on family that most people consider cousins, aunts, uncles, nieces, nephews, and sometimes really close friends or neighbors as “extended families.”

Filipino families are big and close that it would not be a surprise to see several generations of one family living in just one compound over the years.

And it’s not just the close ties that are extraordinary, Filipino families always help one another. If a family, for example, is having trouble with their kids’ school fees, an aunt or uncle would be there to chip in and help.

There are many instances when elder and more established cousins in Metro Manila would let their younger cousins from the province live with them while they look for work.

What’s more amazing is how Filipino families support their elderly. While in many countries, the elderlies are sent to assisted living, Filipino grandparents get to spend the rest of their years with the family.

If grandma or grandpa gets sick or hospitalized, expect the full force of the Filipino extended family to help in the finances.

The mindset of a Filipino employee is that they work for the family, which is why an employee has to take a leave to attend to their family in terms of an unexpected event or emergency.

If there is one more thing to know about Filipinos, it is the fact that they are almost always online, surfing the internet more than anyone in the world.

Records show that internet penetration in the Philippines has grown to around 76%, a big number considering the country’s archipelagic geography.

With nearly everyone in the Philippines owning a smartphone, it is no surprise that an average Filipino spends nearly 11 hours surfing the net in one day, half of which is spent on social media.

Aside from being the “internet and social media capital of the world, Filipinos also adapt smoothly to any trending platform and are very fast learners when it comes to the latest technologies.

In fact, a 2018 study found that more than half of Filipinos born after 1996, Millennials and Gen-Zs, are all confident with their technological skills, topping the Southeast Asian region.

With infrastructures in place for 5G connectivity and a third telecommunications player entering the market, the Philippines’ internet speed is bound to go up.

Just in July 2021, the Philippines improved 3 ranks higher in Ookla’s internet speed assessment, a significant progress that will benefit many businesses in the country.

1992 – The first contact center was established in the Philippines

1995 – The Special Economic Zone Act became law, lowering area requirements for development and offering tax incentives to attract more foreign investors

1997 – The first multinational BPO company was established in the Philippines

2000 – The outsourcing industry made major contributions to the Philippine economy, accounting for 0.075% the national gross domestic product

2001 – A US-based outsourcing center moved their operations to the Philippines, generating over 8,000 jobs

– The Contact Center Association of the Philippines (CCAP), the umbrella organization of the country’s contact center industry, was created

2005 – The Philippines gained 3% of the global BPO market, which accounted for 2.4% of the national GDP

2010 – The Philippines was declared the world’s BPO capital with call centers employing over 525,000 people, generating $8.9 billion in revenues

2011 – Revenues generated by the Philippine outsourcing industry grew to $11 billion, comprising 4.9% of the national total GDP

2012 – The BPO industry posted a 46% annual growth since 2006 as the revenues comprised 5.4% of the Philippines’ total GDP

2013 – Revenue generated climbs up further to $15.5B with more than 900,000 Filipinos employed full time by BPO companies

2016 – The Philippine BPO industry opens over a million jobs and was projected to grow 17% annually

2018 – The Philippines ranked 2nd in the “Top 50 Digital Nations” by the Services Globalization Index, following India and Brazil

2019 – The BPO sector continues to expand outside the capital Manila, with outsourcing firms in the countryside accounting for 51,000 additional full-time workers employed

Cost-efficiency is the most common reason why businesses outsource to the Philippines, with companies saving up to 70% in costs with their Philippines team.

The reason for the lower costs is the cost of living in the Philippines, which is considerably lower than its western and more developed counterparts.

To illustrate the stark difference in living costs, a couple living together in the US may need a budget of around $380 a month for their groceries, while in the Philippines that couple will only need some $220 for groceries.

Even the daily minimum wage is very different. In the US is the daily minimum wage is around $58, much lower compared to the $11.17 in the Philippines.

An accountant’s average salary in the US is around $4,600 a month, while an accountant outsourced in the Philippines is getting an average salary of $558 monthly.

The National Economic and Development Authority in 2018 said a decent living wage in the Philippines is around $834.73 a month for a household of five.

In essence, offering a thousand dollars as a monthly salary for an important role can already enable a Filipino to live decently.

Savings is just one aspect of the benefits of outsourcing to the Philippines. What a team in the Philippines can do for a business in an equally important aspect that is often overlooked.

Talent in the Philippines can be transformative to any organization. Many companies have improved work efficiency and customer satisfaction, among others, with their team in Manila.

While cost-effectivity is usually the main draw of the Philippine outsourcing industry, nothing less could be said about its workforce.

Coming from a culture where finishing one’s education is a central focus in life, the Filipino BPO workers are self-motivated and highly educated people.

Proof of this is the Philippines’ functional literacy rate that stands at 91.6%, which is seen to go higher after the country adopted a 12-year education program on par with international standards.

The education system in the Philippines emphasizes the value of speaking English, making Filipinos are not only very proficient in using the world’s lingua franca.

In fact, in 2021, the EF English Proficiency Index ranked the Philippines 18th among 112 countries and 2nd in Asia when it comes to English proficiency.

The EDPI classifies Filipinos as “highly proficient” in English, able to make work presentations, read and understand newspapers and television programs, and comprehend and express coherently in written or spoken form.

In a professional setting, Filipinos have always been known for their work ethic that consists of patience, resourcefulness, resilience, and an enthusiastic collaborative spirit.

Moreover, living in a country that is basically a melting pot of cultures, Filipinos can seamlessly adapt to the culture of any foreign company.

What is commonly not known about the Filipino BPO workforce is that the skills and talent in the country are much more diverse, covering entry, back-office, to high entry roles in almost any industry.

Businesses from around the globe have successfully outsourced a diverse set of roles to the Philippines, such as outsourced Philippine-based virtual assistants, accountants, architects, engineers, graphic designers, virtual assistants, developers, and more.

Some organizations even found success hiring high-end roles, like country managers, chief finance officers, web developers, and senior accountants, among others.

Because of the high quality of talent, the Philippines has attracted a lot of foreign investors, including the top organizations in their respective fields:

· Accenture
· Amazon
· American Express
· AXA
· Bayer
· The Big Four: Deloitte, Ernst & Young, KPMG, and PwC
· Dell International
· Google
· IBM
· Infosys
· Jones Lang LaSalle
· JP Morgan & Chase Co.
· Macquarie
· Maersk Global Service Centres
· Reed Elsevier
· Sunlife
· Telstra
· Thomson Reuters
· Wells Fargo

The 25-year-old Philippine outsourcing industry might be relatively young, but the development it posted over the last couple of decades shows that it is already a maturing market.

To date, the Philippine BPO sector has grown to be one of the two “primary legs” of the country’s economy, contributing roughly $27 billion to the national economy.

Despite the COVID-19 pandemic slowing it down, the Philippine BPO industry continues to become a bright spot, managing to post a humble yet productive 1.4% revenue growth.

In 2021, the Philippine outsourcing space shows major signs of bouncing back, with BPO office demands rising up to an unprecedented 160%.

Industry numbers show that the Philippines BPO industry is still on track to reach earlier targets to capture 15% of the global share of the IT-BPM market in 2022, which translates to around $38 billion in revenues.

While voice services remain a main source of employment in the Philippine BPO space, experts are also seeing an increase in demands for non-voice services, like healthcare process outsourcing, gaming support, software, and animation.

The continuous growth of the industry had the help of the IT & Business Process Association of the Philippines (IBPAP) which made the 2022 Roadmap 6 years ago.

One of the biggest things that boosted the outsourcing industry was the passage of the “Ease of Doing Business Law” in 2018, which basically removes bureaucratic red tape in putting up and running a business in the country.

With the law, foreign investors were able to put up businesses using unified business application forms, one-stop-shop business centers, and no-contact automated systems.

Top universities in the Philippines have also partnered with the BPO sector in a bid to produce more mid- to high-level talent that will match the demands of the industry.

Cities outside the capital, dubbed as “next wave cities,” have also developed their own BPO centers. Metro Cebu, Metro Clark, Bacolod City, Davao City, and Iloilo City have all made significant development in the BPO space.

As early as 2021, the IBPAP is already mulling the creation of a “2028 Roadmap” to address issues and innovations that need to be fleshed out, especially after the pandemic changed the dynamic of work.

The association knows that with the rise of hybrid workspaces, there is no turning back to the old model, and they need to craft new goals and strategies to further boost the BPO industry.

Digital innovations and new working models are already in place to propel the Philippine outsourcing industry into the post-pandemic world.

In fact, despite India being the top outsourcing destination, the Philippines’ capital, Manila, ranks 8th on Tholon’s “Top 100 Super Cities” when it comes to global innovation, a step ahead of Mumbai.

· Natural and physical disaster risks

It is no secret that the Philippines, sitting at the rims of the Pacific, continues to endure frequent bouts with typhoons, quakes, and volcanic activity. But not all places in the country are prone to floods and ashfall, there are places that are relatively safe and sturdy enough to do business. Ask your partner about your chosen location, the potential hazards there, and the city or building’s level of preparedness. There are even areas in Metro Manila that stands in near a long fault line and you should know the risks of setting up office in these areas.

· Power supply and internet connectivity

Internet penetration in the Philippines is pretty high for a developing country, although not all spots have a good connection. Your partner should know the strength of both internet and mobile connectivity of local providers in the area to ensure a stable business continuity plan. There are also places outside Metro Manila that still experience power interruption, especially during the dry season, which could be a deciding factor when choosing a location.

· Access to education hubs and talent pools

Your outsourcing partner should have data of special talent pools in specific locations in the Philippines. In this case, you might want to consider looking at several locations, their talent pools, and how these might fit your goals. It is also important to consider proximity to educational institutions in choosing your office, as universities in the Philippines have close ties with the BPO industries. Setting up headquarters near university hubs will make it easier to spot emerging talent that you may need to grow.

· Urban mobility and commuting ease

Business districts in different metropolitan areas across the Philippines are commonly hounded by traffic jams, especially during rush hours. This can cause problems with your team members, who might miss work hours or even experience work fatigue due to the daily bouts with heavy traffic. A hybrid solution would help prevent productivity loss, but you still want to have an office near public utility vehicle terminals. There are many modes of transportation in the Philippines. The most common are buses, trains, public utility vans, jeepneys, and tricycles for the inner roads. Taxi and ride-sharing services are also common but are only used in worst-case scenarios due to their price. You might want to study if providing transportation allowance is feasible to ensure high work productivity among your people.

· Proximity to commercial spaces

It is equally important to ensure that your office space is located near commercial establishments, like cafes, malls, and banks. First, having an office in these establishments will guarantee faster transactions as malls often hosts government agencies needed to secure necessary permits. Second, it would be easier for your team to shake off stress or order food for lunch or office celebrations. Malls are also the usual go-to place of employees during paydays, either to go shopping, buy groceries, or even send money to their family, relatives, and loved ones in the province.

· Supply chain access and efficiency

Make sure your Philippines team is in a place where it is easy to send important work equipment. Having an offshore team is challenging enough, so you want to make sure that your headquarters has quick access to supply chain networks. Most metropolitan areas are always accessible to supply chain networks, but in a hybrid model, where an employee can live in a relatively far-off area, you would have to consider how this factor plays out.

· Scalability and future-readiness

As a businessman, growth is always a top priority, may it be short or long term. You may want to start slow and steady by creating a small team in the Philippines, but you would have to assume that at some point, your operations are bound to grow. Is your chosen space or location capable of handling more people? Does it have more spaces for other aspects of the business you would want to outsource? These are some of the questions you might consider when looking for a spot for your Philippines team.

· Metro Manila

This region is home to the capital Manila, alongside other cities their own BPO hubs. Power and connectivity are almost not a problem, except for the rare emergency shutdowns. Mobility can be hard because of several traffic choke points but almost everything, from education, finance, and commercial establishments are accessible. BPO spots in the metro are in Quezon City, Makati City, Taguig, Pasig, Mandaluyong, and Alabang, among others. Offices in these cities are mostly built for BPO operations, but the cost of living can be relatively higher compared to other locations, especially in the business districts of Makati, Taguig, and Ortigas Center.

· Metro Clark

Metro Clark, a BPO hub 50 miles north of Metro Manila, has been classified as Special Economic Zone suited to accommodate more foreign investors. Compared to Metro Manila, traffic and mobility is better because the population in the area is less dense. The business district is also closer to the international airport, making it very ideal for those who frequently want to visit their sites. Commercial establishments and financial institutions are already in place in its business districts, but the cost of living is relatively lower, too, compared to Manila – a big win for both your organization and your team members.

· Metro Cebu

Metro Cebu, the second-largest urban area after Metro Manila, is host to many business districts as well. This southern region is filled with already developed BPO hubs scattered across Cebu City, Mandaue City, and Lapu-Lapu City. Metro Cebu has an international airport, which is widely considered as the gateway to the southern provinces of the Philippines. Mobility in this region is somewhat similar to Metro Manila, with a lot of traffic choke points. But the government has already begun projects to address traffic, like Cebu Monorail system, Bus Rapid Transit, and Metro Cebu Expressway, all of which are rising soon.

· Next Wave Cities

While many businesses still prefer Metro Manila, many regions are rising fast as BPO hubs. These “Next Wave Cities,” have already established the foundations of a good outsourcing hotspot, like business districts, topnotch universities, airports, infrastructure, commercial establishments, transportation systems, and connectivity. These rising BPO hubs include Metro Davao in Mindanao, Bacolod and Iloilo in Visayas, Baguio in Northern Luzon, Dasmarinas City just South of Manila, Naga City South of Luzon, among others. In planning future scalability, these sports are worth looking at as many businesses are already discovering the untapped talent pools in these cities.

· Regular Employment

The Philippine Labor Code sets that all employees that perform activities considered necessary and desirable to the employer’s overall business scheme should be considered regular. It means if a person’s job is necessary to the operation of his employer, he or she should be a regular employee. All regular employees will eventually be tenured and cannot be terminated without an authorized and justified cause after due process. A full-time regular employee works eight (8) hours a day with an hour of break. This is the most ideal type of employment sought by many workers in the Philippines.

· Probationary Employment

Businesses are allowed to hire people under probationary status, where an employee undergoes a trial period for the company to determine whether he or she qualifies for the role. Probationary employees are still under the security of tenure and cannot be terminated without just cause. The Philippine Labor Code clearly states that the probationary period should not exceed 6 months from the date of employment. After 6 months, the employee is automatically promoted to regular status. Companies are allowed to promote a probationary employee to regular status earlier than the prescribe six months.

· Casual Employment

A casual employee is a person engaged in a job or activity that is merely incidental to a business, like a mechanic hired for repairs or a painter commissioned to repaint office spaces. Despite working in an agreed limited period of time, casual employees still enjoy all the rights and privileges of a regular employee during his employment. He or she is also subject to the same duties and obligations indicated in the Philippine Labor Code. If a casual employee has worked for the company for at least a year, whether continuously or not, he or she will have to right to become a regular employee.

· Part-time employment

Regular employees can be hired on part-time basis. Philippine laws allow part-time employment, which is basically a contract where regular employees work under the daily standard of 8 hours. The pay for part-time employees must be proportionate to the number of hours they worked for the employer. They also enjoy the security of tenure and cannot be terminated without justified cause after due process.

· Fixed-term Employment

A fixed-term employee is someone engaged on a job for only a specific term. Philippine laws allow companies to hire employees on a fixed-term basis if two requirements are met: First, the employee must have willfully and voluntarily entered into the fixed-term contract without intimidation or force. Second, both employer and employee must have bargained on equal footing on the terms and conditions of employment. A fixed-term contract can be for months or years, but it always must have an end.

· Project Employment

The employment of a project employee is fixed for a specific project or undertaking. In essence, the services of a project employee is coterminous with the project. But it is a requirement for this contract to inform the employee about the completion time of the project. Not doing so will deem the employee regular. Project-based employees are also secured with tenure, but they are not entitled to separation pay when their contract ends.

· Seasonal Employment

Seasonal workers are considered regular employees but are already paid for their hours during the working season. Their relationship with the employer when the working season ends are not severed but is merely suspended. The job of a seasonal worker must be seasonal in nature like workers needed only during harvest season or Christmas events. There must also be evidence that the employee worked only for the duration of the season.

· Salary and minimum wage

The minimum wage for non-agricultural workers in the Philippines depends on the region. In Metro Manila, the daily minimum wage is $11; in Angeles City, Pampanga, it’s $7; in Cebu City, it’s $8; and in Davao City, it’s $7.8. The minimum wage for other municipalities may be lower, depending on the level of economic activity. The monthly salary is usually paid every 15th and last day of the month.

· Allowance and benefits

The basic salary of a Filipino employee does not include allowance and benefits. Allowances up to $1,780 are exempted from tax in the Philippines. Benefits can be in the form of rice allowance, transportation allowance, food allowance, or a Christmas bonus. Health benefits in the form of an HMO plan are the most common allowance offered by companies. Any allowance more than $1,780 can be added as taxable compensation income.

· The 13th Month Pay

A unique mandatory benefit in the Philippines is the 13th month pay where companies are required to give employees not less than one-twelfth of the total basic salary they earned in a year. All employees, regardless of status, if they worked for the employer for more than a month, are entitled to a 13th month pay. The 13th month pay must be given no later than December 24. Failure to do so would result in penalties.

· Income Taxes

The Philippines uses a graduated scheme for income taxes. An employee with an annual taxable income of $4,965.79 will not be taxed. Someone earning over that amount in a graduated scheme. Income taxes are deducted from the employee’s gross income every pay cut. Every year end, companies annualize the income taxes of the employee to make sure the right amount was deducted.

· PhilHealth

PhilHealth or the Philippine Health Insurance Corporation is the mandatory administrator of the Medicare Program in the country. The required contribution of an employee is 3% of his or her monthly basic salary, with a minimum of $198.59 and a maximum of $ 1,191.54. This monthly contribution is shouldered equally by the employer and the employee.

· SSS

The Social Security System follows a table of contribution based on Monthly Salary Credit (MSC) or the employee’s monthly gross salary. Unlike PhilHealth, SSS considers all payments and deductions made to the employee, including overtime pay, absences, and tardiness. The total contribution is 13% of the MSC, where 4.5% is shouldered by the employee and 8.5% by the employer.

· Pag-IBIG

Pag-IBIG, or the Home Development Fund, is the government’s affordable shelter financing program for Filipino workers. Pag-IBIG contribution for the employed sector is $3.97, where half is shouldered by the employee and the other half by the employer. The employee has the option to increase his or her Pag-IBIG Fund contribution, but this will not oblige the employer to match the increase of the employee.

· Normal Work Shift

Philippine labor laws set a normal workday at 9 hours, 8 hours of work with 1 hour of non-compensable break. The typical workday starts at 8:00AM and ends at 5:00PM. Noon is usually reserved for lunch, for those whose schedule starts at 10:00AM, the 1-hour meal break may come later.

· Flexible Schedule

Flexible work schedules are also allowed in the country. Pre-COVID, flexible work arrangements are usually reserved for higher or more supervisory roles. The pandemic, however, shifted this norm as more companies adopted flexible schedules for their hybrid workforce.

· Night Shift

By law, any employee who works between 10:00PM to 6:00AM is entitled to a night differential pay, which is 10% of his regular wage for every hour rendered. If an employee’s schedule, for example, is 3:00PM to 12:00MN, he or she is entitled to a 10% for each of the two hours she worked. Night differentials should be filed for proper documentation.

· Overtime Pay

Employees in the Philippines may not be compelled to work beyond 8 hours unless there is an emergency as stipulated in the labor laws. As a practice, however, some employees who need to work beyond 8 hours can do so provided the overtime work is pre-approved by the manager. Overtime pay is equivalent to his regular wage plus 25% hours. If the overtime falls on a rest day, the employer pays the 8 hours plus 30%. If it goes beyond 8 hours, there will be an additional 30%.

· Types of Philippine holidays

The Philippines usually has at least 18 holidays in a year, 14 of which are classified as “Regular Holidays, while 4 are classified as “Special Non-Working Holidays.” The Regular Holidays are fixed, like Christmas Day, Independence Day, or New Year Day. Special Non-Working Holidays may vary on their date.

· Regular Holiday Pay

On Regular Holidays, Filipino employees are not required to go to work but will still get their pay. If they will be required by the company to go to work, they will be paid an additional 100% of their daily wage. If it falls on a rest day, the employee is entitled to an additional 30% of her regular wage.

· Special Non-Working Holiday Pay

On Special Non-Working Holidays, Filipino employees are not entitled to any pay. But if the employee is required to go to work, he or she is entitled to an additional 30%. If it falls on a rest day, the employee will get an additional 150% pay.

· Service Incentive Leaves

Philippine laws mandate that every employee who has rendered at least a year of service is entitled to 5 service incentive leaves. But most companies go beyond the standard, with some offering 20 service incentive leaves, 5 of which are sick leaves and 15 vacation leaves. If the 5 law-mandated leaves are not used, it can be converted to cash based on the employee’s salary rate.

· Maternity Leaves

Female employees, regardless of employment status, are entitled to 105 days of fully paid maternity leave. If the employee is a solo parent, she is entitled to 15 more days of fully paid maternity leave. In cases of live childbirths, the law provides 30 more days of unpaid leave if the employee wishes to avail of the benefit.

· Paternity Leaves

Male employees, regardless of employment status, are entitled to 7 days of fully paid paternity leave. The benefit is applicable only for the first 4 deliveries of his lawful wife, provided that he is living with his wife. If he is away from his wife because of his work, the male employee is still entitled to the benefit. Paternity leaves can be used only after the delivery.

· Parental Leave for Solo Parents

Solo parents have 7 days of fully paid paternal leaves. The law gives specific definitions of a solo parent, which includes widowed parents, a parent whose spouse is in jail or diagnosed with physical or mental incapacity, a parent who has been legally separated but was entrusted the custody of children, among others. Unused paternal leaves cannot be converted to cash.

· Special Leaves for Women

Any female employee, regardless of employment status is entitled to a special leave benefit if she requires to undergo procedures for gynecological disorders. To avail this benefit, the employee must have rendered at least 6 months of aggregated employment service for the last 12 months prior to surgery. She also must secure a certification from a qualified physician.

· Leave for Victims of Domestic Violence

Women who were victims of violence against women and their children are entitled to 10 days of fully paid leaves for days she needs to attend medical and legal concerns. The law only requires her to secure certification from the barangay officials or clerk of court. The leave can be extended if the need arises, as specified in court or barangay orders.

· Just Cause

Employers can terminate an employee who has violated several company policies or repeatedly misbehave after. There must be due process before the employer can terminate the employee. Termination due to just cause can be effective immediately. An employee terminated this way will not receive any additional pay.

· Retrenchment

Employers can terminate a contract of an employee in the event of retrenchment. This happens when a company has a declaration that it is having economic difficulties and it must release some employees to survive. Employees terminated this way will receive an additional pay equivalent to half a month of pay for every year of service.

· Redundancy

Employers can terminate an employee based on redundancy if the company has a surplus of workers in the same role. Employees terminated through this will receive an additional pay equivalent to one month of salary for every year of service.

· Disease

An employer can terminate an employee if he or she deems that the illness of the employee will be affected by the nature of work. Employees terminated this way will receive an additional pay equivalent to half a month of pay for every year of service.

· Probationary Standards

If a probationary employee fails to meet the standards set by the employer before the end of the 6-month period, he can be terminated.

· Breach of Contract

Under the Philippines’ Civil Law, employees who engage in activities that breach their contract with the employer can be terminated, provided the employer has already given them time to rectify the mistakes and the mistake has been repeated.

If you are just starting with outsourcing, you want to be clear with your objectives. That is why the first thing you need to do before setting out on your outsourcing journey is to do an assessment of what you do and why you need outsourcing.

Of course, savings will always be top of the mind when outsourcing, but there are certainly bigger goals that you need to list down. Are you outsourcing just to fill a role? Are you outsourcing to improve a specific process in your company? These are some of the important questions you need to answer.

You can only answer these “why’s” if you have a proper assessment of your company’s structure and needs. All the information you come up with will be key in finding the right partner that can deliver the specific results that will help you reach your goals.

Finding the right partner is perhaps the most crucial thing when delving into outsourcing. Make sure you take all the time to study several providers, their profile, structure, clients, and processes. All providers will promise cost savings, but the more important thing to consider is compatibility.

Not all providers can match your companies demands, making it important for you to personally learn about the provider, ask about specific processes, ask for timelines, how some of their clients and how they delivered, explain your objectives and ask frankly how they can help you do it.

Remember: Avoid rushing in. You don’t want to take up the offer of the first provider that knocks on your door. Doing so will only bring you problems in the long run, when suddenly you discover hidden costs or perhaps some processes that are not flexible enough to get you to your goals.

Transparency is the key to getting your outsourcing partner on the same page. You more information you give about your goals and direction, the more your partner can understand the things you need to meet these objectives.

You also must set expectations from the onset, and make it clear what your partner’s role will be and what part will you play in building, sustaining, and improving your Philippines team. To do this, you must be straightforward and ask hard questions.

Open communication is crucial in having a successful partnership and both parties need to sustain this level of transparency throughout the journey. This will prevent small problems from ballooning into big and devastating ones.

Outsourcing, like all investments, has risks. That is why you need set expectations with everyone in your company from the very beginning. Take time to study and explain how outsourcing works, its models, the risks, and the benefits.

Make time to train yourself and the departments involved. Speak to your people personally to get the buy-in. The people in your company must understand while outsourcing companies a certain amount of savings, it might not come within the first few months because work must be done first.

Getting everyone to buy in makes it easier to proceed with the process. This way, the whole company is on the same page and ready to welcome the Philippines team. You also avoid misunderstandings that could hamper your progress.

Onboard your Philippines team the way you onboard your local staff. Take them to a few meetings and introduce them to everybody. Let them observe how your staff works for a few weeks. Speak with them personally about their role and what they can expect from the company.

It is crucial for you to give your Philippines time and training before letting them speak with the customers. Make your offshore team understand first why you have these processes, their place in the company, and how things can turn out of these processes are not followed.

At this point, you must also be aware that you are employing someone from a different culture, and you might need to tweak the messaging on your onboarding documents, KPIs, and scorecards. This is where your outsourcing partner can come in and help.

After getting through a thorough onboarding, some companies have the tendency to be complacent with their Philippines team, and this is when problems start to arise, especially with instructions and sudden changes in direction.

For example, some managers who would ask an offshore staff to do another job would prefer to do it via a short and straightforward email. The more senior staff will ask questions, but oftentimes, you need to explain thoroughly why there is a change of directions and the impact it has on the business.

There are even cases when a junior manager from your company might give an opinion that a member of your Philippines team might misconstrue as an instruction, deviating the offshore staff from your original orders. To avoid this, it is important to clarify reporting lines from the onset.

Businesses that find the most success in outsourcing usually start small and slow. If you have a 2,000-seater customer service in the US, you might want to start with a hundred people. A small business with 3 people doing a specific role may start with 1 person and gradually add more staff from the Philippines.

Starting slow and gradual will help you understand the rules of the ball game, the dynamics of the industry, and the profiles that best suit the roles you need. It also gives you time to properly invest in the training for your offshore staff.

Training your offshore staff, too, can come in small tranches. Before letting them speak with your customers, train them in specific processes first, like appointment setting and lead generation, until such time they understand your product or service that they can talk about it the way you would do.

Your offshore team may be miles away from your headquarters, but it is still your team, nonetheless. And treating your Philippine team the way you treat your local staff will be key in creating an organic synergy and long-term working relationship.

Take time to know your team, let them know you, and always get them in the loop through daily stand-ups. This will make them comfortable talking with you about work-related and personal topics that will be important in the long run.

Comfortable enough, your Philippine team will learn to ask when there is something about work that they need to understand, speak up respectfully when they have great ideas, and raise concern if a customer is having problems that need to be solved by another department.