The Quest for Savings: Why It’s Cheaper to Outsource in Today’s Global Economy

blog photo 2022 sept1 min

These days, the single global workforce has obtained a push for normalcy. More and more companies are appreciating how valuable delegating to a third party can be, and this shows in how many international business process outsourcing (BPO) companies have emerged in the past 20 years. This impact can definitely be felt in the 21st century. 

Why exactly is that? Well, the cost to outsource ultimately weighs lighter than handling and having in-house staff on the payroll. It’s no secret that outsourcing is a lifesaver when it comes to the bottomline of small to large enterprises. 

You don’t want to invest too much that you lose out on profits or investment returns, but you also want to make sure you are paying for something worthwhile. Productivity matters when hiring manpower, after all.

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How much does it cost to hire in-house?

That’s the question in almost every booming business’ minds. The cost to hire in the US can reach all the way up to $7,000 and above monthly. Take note there’s also a variance that applies to these salaries, all depending on the role, experience, qualifications, and skills of hires. Market demand for their specific skill set must also be taken into consideration. 

At best, you could probably pay a few month’s worth of office rent, as well as a few computer sets for employees. This $7000 can cover that, but probably couldn’t assure the cost of employees’ wages — so you would need to reinvest more capital to retain them long-term. This is for sure an annual cost that’ll skyrocket if you plan to fill out a whole floor of employees. 

Let’s take customer service as an example. This is the average breakdown for a year’s worth of expenses for one customer service representative, along with an accompanying customer service manager in the US:

Item
Cost
Salaries and Benefits
$35,321
Customer Service Manager
$45,726
Hiring costs
$5,162
Office space (per person)
$16,800
Software and Hardware
$900
Total
$103,909

That’s a total of $103,909 per year for just one representative. The cost could well balloon the more employees you require. This figure does not include costs related to training, office supplies, fees, and commissions as well. That’s a lot of money that large companies invest in yearly. 

For smaller to medium-sized companies, however, it might be beyond their capability to support. In terms of options, the most feasible one is to source talent from elsewhere. They could go about this in one of two ways: locally-sourced talent from nearby agencies, or sourced virtually from elsewhere in the world, through a global 3rd party agency. 

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Option 1: Locally Sourced 

The cost of call center outsourcing in the U.S. can fall between the range of $25 to $65 an hour for each representative. Paying this fee is inclusive of benefits and training, assuming you hire them from an agency. Let’s do some math. Say, your business needs 5 representatives that operate 9-5 on a 5-day work week, and you hire them at a rate of $40 an hour per person. That would take you to about $8,000 total per week, or $416,000 per year

Option 2: Offshore

As a guide, this is what pricing across different parts of the world would look like, should you choose to outsource from there. 

Region
Outsourced Call Center Pricing (per hour)
The United States/Canada
$20–30
Western Europe
$40+
Eastern Europe
$12–25
Australia
$35–55
Africa/Middle East
$15–20
Latin America
$8–18
Asia/Philippines
$8–14
India
$6–10

Looking at the bottom of the pricing per region table, you would see that the pricier regions lie in the West (North America and Europe). Meanwhile, the bottom two regions, the Philippines and India, turn out to be the cheapest areas to outsource from.

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So, should you go with the cheapest option?

You may have heard stories about how much cheaper it is to outsource workers in developing countries. Countries where outsourcing is strong — the Philippines and India for an example — are ripe with opportunity. Delegating a part of your workforce to capable and knowledgeable professionals that hail from these countries is the key to your company’s growth. With a fraction of the amount above, a business can enable a BPO partnership to provide monthly wages for employees under them, as well as cover overhead costs and work equipment. 

Most people would equate BPOs with dispensable staff or rudimentary job descriptions, but things have grown since they first emerged in the market. Nowadays, jobs like accounting, market analysts, sales, product development, and practically every other major role are outsourced. As long as the job can be done on a computer device, it can be offshored.  

India

India is the top outsourcing destination when it comes to I.T. and web development industries. Outsourcing from India can be 50% cheaper than in the U.S. As of writing, India is home to more than 1,100 global in-house BPO centers. This allows most of the 500 global companies to tap on Indian professionals to fulfill their jobs. 

The Philippines

The Philippines does not lag behind. Plenty of executive positions and entry-level jobs are in high demand in the Philippines. They can cost from $24,000 to $48,000 a year here in the U.S. Whatever figure those are, it can be generally cheaper in the Philippines — from 60% to 80% cheaper than their U.S. equivalents.  

Let’s compare the figure above with what an average call center agent in the Philippines earns. The average call center agent salary in the Philippines is ₱318,000 (about $5,800 as of writing) per year. That’s less than $3 per hour. Furthermore, entry-level positions start at about $4,925 per year, while workers with more experience can make upwards of $8,750 a year. That’s for call center agents. Other salary figures of related positions would look like this in the Philippines:

Position
Average Yearly Salary in PHP and USD
Project Manager
₱ 570,000 ($10,376)
Sales Specialist
₱ 420,000 ($7,645)
Team Leader
₱ 420,000 ($7,645)
Coordinator
₱ 390,000 ($7,100)
Support Specialist
₱ 360,000 ($6,553)
TSR
₱ 336,000 ($6,116)

Generally, the pricing of BPO agencies is 50-60% less than what you’d expect to pay in developed economies. People might be shocked at how low a bracket this can be, but in the context of a Filipino worker, a yearly salary of $7,000 is above the average, and quite lucrative.

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In conclusion

Businesses nowadays aim to hire based on skills, quality, and accessibility. The cost consideration is a very important factor in hiring as well, but gone are the days when you hired based on their proximity to your business. These days, outsourcing is the key to hiring the best professionals to round out your team, no matter where they are in the world. 

Outsourcing from third-parties is not an unfair advantage. It’s a strategy that leverages your company, opening up new opportunities for you to strike at. 

Are you looking for an outsourcing provider in the Philippines? FGC+ can be your partner. Get in touch with us today to see how you can leverage your business with an outsourced team.