How to Outsource in the Philippines Effectively (for Tech Companies)

Patrick Ward Patrick Ward Follow Jun 01, 2020 · 11 mins read
How to Outsource in the Philippines Effectively (for Tech Companies)

With an English-speaking virtual labor force of 1.2M+ and average salaries for remote workers in the $400–1,000USD/month range (€353–882), the Philippines has long been a remote hiring hotspot for tech companies. 1

When it comes to virtual assistants, customer support, and other back-office processes, the Philippines workforce is hard to beat on price and quality of service, even in 2020.

The Philippines isn’t without issues, however. Spotty internet, cultural and communication challenges, and brain drain among skilled workers are just the start.

In this post, I’ll walk you through the pros and cons of the Philippines as a hiring location for tech companies, and establish exactly the types of tasks you should consider the location for.

Quick Takeaways
  • The Philippines is recommended for hiring out task-based work with strong process documentation, due to low labor costs and high English-speaking ability.
  • The Philippines is not recommended for hiring technical staff like engineers and data scientists, due to low labor availability and competing talent pools. I recommend regions like Eastern Europe, South America, and India/Pakistan for technical hiring.
  • Getting the most out of talent in the Philippines requires strong task documentation, proactive project management, and willingness to engage with a different culture.

Video Interview: How to Outsource Effectively in the Philippines (as a Tech Company)

What kind of outsourcing talent can be found in the Philippines?

The Philippines has large, cost-effective workforces in the following functional areas:

  • Virtual assistants
  • Project management
  • Data entry
  • Call center support
  • Chat support agents
  • Abandoned cart outreach
  • Email outreach
  • UI and Graphic Design

All of these share two common reasons why they work well with Filipino talent:

  1. Asynchronous tasks. Work that is less time-sensitive is a good fit for reverse time zones with high internet downtime.
  2. Low-mid-education or self-education skillsets. The best value for talent in the Philippines is for skills that can be learned outside of an expensive formal education.

If the work you need done is highly technical in nature, and if you don’t have a physical office in the Philippines to conduct that business process, it’s not recommended.

Tip: Philippines for Chinese/Korean/English-speakers

Chinese and Korean are widely spoken in the Philippines, and if you’re a tech business operating in multiple different locations, that’s good to be aware of. When you’re looking for multilingual talent, the Philippines is an excellent place to find it.

How much should outsourcing cost in the Philippines?

The obvious advantage of outsourcing in the Philippines is cost: when hiring Philippines talent, expect to pay around one-tenth of the corresponding rate in USD for US-based workers.

You can find a full-time virtual assistant there for as little as $400–500 a month. Add a zero on that for the $5000USD/month cost of US-based low-mid-skill remote workers, and you can see why that matters for your business.

Any lower than $400–500/month and you’ll struggle to maintain quality and priority over other companies competing for workers. $1000/month is a good standard to go by; you can get high-quality talent for that rate, and they’ll prioritize your work and engage for “the long haul.”

Sourcing and Vetting Talent in the Philippines

World Trade Organization reports show that Business Process Outsourcing (BPO) accounts for close to 7% of the Philippines national economy — and it’s likely much higher when accounting for unreported remote labor.

If you’re doing anything more than a small team, you’re going to want a tax consultant to work with and make sure your legal ducks are in a row — especially if you’re building a core part of your business around any processes outsourced to the Philippines.

However, it can be surprisingly easy to find individual virtual assistants or small teams via platforms like Upwork, which may better enable you to build teams of up to a dozen people.

Of course, off-platform and in-person scouting will always be less costly in terms of money, but online freelancing platforms won’t cost you nearly as much time. Time is money, and the idea here is to get past the paperwork requirements and skip the difficulties of locating and securing that talent.

Upwork does bid up your pricing a little bit because of availability. Earlier, I mentioned that a virtual assistant at the low-end can cost you about $500 per month, but on-platform you’ll pay closer to $800+ per month. Additionally, your contractors can be more easily poached by other clients. After all, a 50-cent raise is a huge percentage of a $5/hr paycheck.

If you do go-off platform, consider incentivizing Filipino colleagues to recruit friends and family.

Important point: always use a robust testing process when making long-term hires in the Philippines

Assessing talent for BPO is very, very difficult. It's not like engineering or design where you can see a clear track record on GitHub or Dribbble.

With that in mind, building a rigorous and multi-step testing process for new candidates is essential. My best experiences with Philippines talent have all involved hiring processes with literal multiple-choice tests on processes and concepts required to do the job well. It may feel extreme if you're used to working with in-office assistants, but it's critically important with virtual staff, particularly the Philippines.

For long-term hires, expect to interview and test 20+ candidates who all appear qualified at first. You want to narrow it down through practical testing in multiple rounds, *not* through gut instinct or resume evaluation.

Should I hire developers in the Philippines?

Although there are strong engineers to be found in the Philippines, they tend to focus mainly on app development and the call center industry and be more effective when working on-premise with local companies.

Compared with other tech outsourcing hubs in Latin America and India, the Philippines has lagged a bit on government engagement with STEM education. 2

What tech talent they have also tends to vacate the country to places like Singapore, for example, in order to find higher wages than are paid in Manila.

How to improve retention of staff in the Philippines

Sadly, a lot of companies specifically come to places like the Philippines to take advantage of low regulatory standards.

The best retention tricks for Philippines-based workers boil down to “don’t be a jerk.” A few low-cost perks and basic amenities go a long way:

  1. Sign workers up for a 13-month contract. This basically says that when you reach the one-year mark, you get an additional month’s worth of pay. It builds in an annual bonus that they’re going to want to stick around for every year, unlike quarterly or monthly incentive systems.
  2. Account for Catholic holidays. Catholicism is common to Filipino culture, so provide reasonable off time for holidays. Two weeks for Christmas is normal, even for remote VA-type contracts.
  3. Keep track of their family situation. Family is hugely important in Filipino culture, so don’t feel like you’re overstepping if you ask “how’s the family doing” on catch-up calls. Asking how their family is doing on a catch-up call can go a long way towards building rapport, even if it might feel too personal when engaging with a US or EU-based worker.

Keep in mind that remote contractors in the Philippines may be sacrificing a higher wage tier for the sake of caring for family, given the higher salaries to be earned by simply leaving the Philippines. It’s common for virtual assistants to be “stuck” in areas with poor internet due to the requirement that they care for an aging family member.

Again, if you don’t just treat them as a number, they’ll be likely not only to stay, but to refer friends and relatives to your company.

Obstacles to Outsourcing in the Philippines

The internet and the time zone are going to be the two biggest logistical factors here.

  • Massive gap between time zones. VAs in the Philippines commonly work the midnight shift to sync with US and EU clients.
  • Frequent storms and natural disasters. Experiencing spotty connection or outright downtime is not an irregular occurrence in the Philippines. In fact, call centers will often have a handful of internet providers just for one building in order to avoid downtime. Working with individuals in smaller offices or their home, the issue becomes more pronounced and impossible to troubleshoot. Also note that residential internet providers in the Philippines cycle through IP addresses very rapidly.
Tip: Jamaica for call centers

If you're looking for a US nearshore alternative to the Philippines, Jamaica is an undervalued location for English-speaking call center operations and customer service/chat support, with a $2.50USD average hourly rate for call center employees in Eastern Standard Time (EST). However, it is less well-suited to individuals and small companies, when compared to the Philippines.

Workarounds for common issues with Philippines BPO

Internet workarounds

  1. If you’re working with virtual assistants, you’re likely working with people out of a small office or their homes. If they’re working from home, include their internet bill in the contract (and require a receipt each month) to ensure they have the best possible connection. This should also allow you to get them a dedicated IP, if needed for your tasks.
  2. Get them a MyFi router or mobile wifi hotspot. A variety of companies in the Philippines offer this because when the physical line goes out, mobile reception from cell towers will probably still be operational. It adds another layer of security to keep processes flowing if the wired internet goes down.

Time zone workarounds

  1. Establish (reasonable) expectations of daily work hours. Read between the lines try and assess what other jobs they might be doing, because they may be busy working multiple jobs. Normally with offshoring or nearshoring, I don’t recommend strange hours — but in the Philippines, virtual assistants more often prefer to work overnight, when fewer people are using up internet bandwidth.
  2. Account for family and religious holidays. Related to what I mentioned about culture earlier, family is big for them; therefore, so is stability. They’re in a weak negotiating position, so set a process for giving out raises according to your budget. Even if it’s small and symbolic in nature, show the people who stay with you that they’re getting somewhere. If someone has worked loyally with you for five years, they shouldn’t be making only 5% more than what they started at.
  3. Avoid putting them “on the spot” on conference calls. Although Filipino people speak excellent English, they tend to be self-conscious about their accent on group calls and more comfortable with text-based communications. When doing conference calls, they sometimes are cautious to engage, so save video calling for personal engagement moments. For example, if their quarterly raise is coming up, don’t just email them about it. Give them a quick call to remind them that you appreciate their hard work, check in, and let them know you’re giving them a raise for their hard work. For other purposes, though, email will work just fine.
Summary
  • Expect to pay $400–1,000/month for virtual assistants in the Philippines.
  • Use a rigorous testing process to evaluate talent, especially for admin roles.
  • When hiring technical talent, you should first consider locations with more favorable pricing, time zone, and reputation for engineering and development, such as Uruguay for the strongest education pipeline, or Pakistan for the best pricing value.
Patrick Ward
Written by Patrick Ward Follow
Hi, I'm Patrick. I made this site to share my expertise on team augmentation, nearshore development, and remote work.
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