If there’s one benefit to outsourcing in the Philippines, it’s the low cost of labour. Outsourcing to the Philippines can save you up to 70% on your labour costs compared to hiring in-house staff in developed nations.
However, there are other costs to consider when outsourcing to the Philippines, such as the cost of doing business in the country. In this blog post, we’ll look at all the costs you need to consider when outsourcing to the Philippines, so you can make an informed decision about whether it’s the right choice for your business.
Cost of Labour
One of the biggest costs of outsourcing to the Philippines is salaries. The average salary for a Filipino worker is around $250 per month. However, this number can vary greatly depending on the type of work you need to do, and the workers’ skillset. For example, if you are looking for a web developer, the average salary would be closer to $400 per month.
The cost of living in the Philippines is also relatively low, so you don’t need to worry about your workers not being able to live on their salaries. In fact, many Filipino workers are able to save a large portion of their salary each month.
Operational Expenses
Another cost that you need to consider when outsourcing in the Philippines is the cost to operate. When you outsource to the Philippines, you will need to set up an office for your workers. The cost of renting an office in the Philippines is relatively low which can hover around $14 – $34 depending on the location.
There are 3 main CBDs located in Manila – Ortigas, Makati, and Bonifacio Global City (BGC). These cities provide the best infrastructure and amenities that an outsourcing company could ever need such as high-speed fibre-optic internet, power, and water.
In Ortigas, the average price for standard office space is $22 per square meter. In Makati, the cost is a bit higher at $32 per square meter. And in BGC, the cost is on the higher end at $34 per square meter.
Furthermore, companies must also consider the utility rates in the Philippines. The average cost of electricity in the Philippines is $0.16 per kWh. The average cost of water is $0.01 per cubic meter, and the average cost for the internet is $50 per month.
While you’re not directly going to pay for these costs, they’ll surely play a factor in your negotiations with offshore outsourcing companies in the Philippines.
Government-Mandated Obligations
There are also a few government-related factors that may affect the overall costs of outsourcing in the Philippines such as 13th Month Pay, Night Differential, Social Security, and Insurance.
13th Month Pay
In the Philippines, all workers are entitled to a 13th-month pay. This is an additional month’s worth of salary given to workers on top of their regular 12 months’ salary. The 13th Month’s Pay must be given to all workers regardless of position or length of service.
Night Differential
Another government-mandated benefit that workers are entitled to in the Philippines is Night Differential. This is an additional hourly rate that workers receive for working at night. The Night Differential rate is usually 10% of the worker’s regular hourly rate.
Social Security and Insurance
Like in most countries, Filipino employees are also entitled to social security (SSS) PhilHealth (Health Insurance), and Pag-IBIG (Savings Fund). It’s the employer’s responsibility to enrol all their workers in these programs and make contributions on their behalf.
The cost of social security is usually around 12% of an employee’s salary with 8% being shouldered by employers while the employee’s shoulders rest. The cost of health insurance, on the other hand, is around 3% of the employee’s salary while Pag-ibig contribution sits at around 2% per year per employee.
Final Thoughts: The Cost of Outsourcing to the Philippines: How Much Will It Cost You?
While setting up and maintaining a team of outsourced labour in the Philippines may look costly, it’s important to remember that you’re still saving a lot of money in the long run because of the low cost of labour. Outsourcing your work to the Philippines will undoubtedly help your business save on costs while still maintaining high-quality output.
