Are offshore and outsourced Filipino employee salaries as cheap as I hear?

Too often I am approached by people telling me they can get a Filipino staff member who has the skills and experience they need for AUD$8,000 per year. In most cases, they have been told by a ‘friend’ or have seen one of the many websites that offer cheap offshoring or outsourcing solutions. So how much weight can you place on such statements? Is obtaining a full-time offshore resource that knows your business realistically going to cost AUD$8,000 a year? In my opinion, it is highly unlikely …

Such statements are the bane of the industry driving a ‘cheapest possible’ mentality. Businesses shouldn’t focus on sourcing the cheapest price but rather should invest time to understand the options that are most likely to meet their goals and objectives. This will rarely be the cheapest offering.

What are costs like in the Philippines?

Manila is the capital of the Philippines and home to 14 million people. Similar to most capital cities, it is also the centre of the available potential employee talent pool. Minimum wage in Manila for a white collar job is about $500 AUD per month excluding government benefits. Include benefits and this will take you to about $600 per month. So the minimum cost of an offshore resource (with no allowance for things like rent, electricity, internet connection etc.) is about $7,200 per year. Unfortunately, you won’t get much for this amount.

Salaries in the Philippines are usually less than 1/3 the cost of an equivalent Australian employee. In addition to salary, you also need to consider other on costs. By far the cheapest option will be to have your staff member work from home but there are countless issues that will arise from this including:

  1. Who else is at home during the day (Filipinos typically have large households with many people at home at any given time)
  2. What is the quality of the internet?;
  3. How will IT support be provided?
  4. Is there emergency back-up power? (brownouts are common in many parts of The Philippines);
  5. Do they have all the tools and support necessary to perform their role?;
  6. How will you maintain staff morale?
  7. How will you supervise and train?
  8. So to do things properly you will need to house your staff in a facility which provides this support or travel to Manila and set up your own facility.

If you are seriously considering hiring offshore or outsourced Filipino employees, you need to be reasonable, realistic and considered. Cost savings should not be the end game for any potential offshore or outsourced implementation. Cost wise, there are significant savings to be had but as with everything, you will get what you pay for. You need to consider other factors, including:

  • Your businesses actual organisational objectives excluding the obvious cost savings that can be obtained.
  • Offshore staff engagement.
  • Staff satisfaction and turnover – a long-term offshore/outsourced staff member is a valuable one.
  • Change management – Making sure that your local workforce is aware of and has bought into any offshore or outsourced solution.
  • Your long-term business objectives. An offshore or outsourced workforce is only part of the equation.

The above is a not an exhaustive list of things that you must consider but need to be acknowledged as a key part of any explorative research you may undertake. A high quality offshore or outsourced staff provider will ask you these questions, avoid those who don’t.

The reality is that you can get cheap labour in the Philippines and the savings are considerable. However, if you focus only on the cheapest solution, it is highly likely you won’t get the experience you bargained for.

Share this post on