When considering your options for offshoring, you may have noticed many providers boasting a “low, all-inclusive price”. It’s an hourly rate per employee that packages staff wages with operational costs such as IT, recruitment and office expenses.
At first glance, an all-inclusive price may seem like an easy way to budget for your offshore team costs and lock in a cost saving on staffing.
But before you choose a provider, it’s important to understand how different offshoring vendors price and package their services, so you can compare them side by side. Apples for apples, if you will.
Because in offshoring, as in life, you get what you pay for. So if a package price seems too good to be true, it’s probably too cheap to be good.
The hidden problem with the all-inclusive price
The reality is, your offshore provider’s business margin all comes down to the difference between the staff wage and the total fee. As such, they may be tempted to obscure the true cost of staff wages. After all, for every dollar they can save on wages, by appointing a cheaper employee, that’s another dollar for the business.
You don’t want your offshoring partner to be incentivized to find the cheapest staff available in the market. What can happen is that the hiring manager appoints poorly skilled people, simply because they fit into a certain price bracket. This leads to poor job performance for your team, and frustration for you over the offshoring process.
Not surprisingly, a fixed price becomes even more challenging when staff need an annual wage increase, but there’s no room for it in the fee. This can lead to poor decisions which aren’t made or taken in the best interest of the client’s. What’s more, poorly paid staff are quick to leave when they’re offered a better rate at another company. Consequently, you lose all the time you’ve invested in training a member of your team, and you have to start again with new employees.
What you need is transparency and a full breakdown of the offshore service fees, separate from wages.
Keep services fees separate from wages
A good offshoring provider will give you a proposal with a full breakdown of service fees and staff wages, so you know exactly what to expect. Just as with your onshore team, you’ll pay a higher salary for a candidate with the right qualifications, who can lead the other members of the team.
The best candidate for the job might cost more per hour than the others, because they have a higher level of expertise. And in most cases, that small extra cost works out to be excellent value for your business because they can hit the ground running.
So it’s important you ask for, and get, a transparent breakdown of salary costs, separate from service fees. This makes it easy to assess the business case for hiring each candidate, alongside their different salary expectations.
Control how much your team gets paid
To begin with, you want to be sure that your staff are getting paid a fair local wage for their work. Then you can use increases on the basic wage to attract the best talent the Philippines market has to offer. If a candidate is considering two job offers at the same time, offering a generous base salary helps attract the candidate to your business.
And it’ll be worth it in the long term, because paying your staff a generous wage makes your team feel valued and rewarded, which makes them enjoy working for you.
Especially in the Philippines, bonuses are a key motivator for staff. Productivity bonuses are a popular incentive for staff to work efficiently and achieve their KPIs. Offshore teams flourish with bonus targets that are relevant and challenging (but achievable).
Another common bonus incentive is based on company performance. When the company achieves its overall targets, all staff in the offshore team share in the performance bonus. Moreover, shared bonuses foster teamwork, which makes your offshore team stronger.
You might consider offering a loyalty bonus as an incentive for your team to stay long term. In fact, some companies choose to pay their staff a bonus of one month’s salary each year, after the staff member has been with the same company for 3 years. This is known as the “14th month” bonus.
As it turns out, a one-month bonus is cheap if it keeps employees with the company for another year, because then you don’t have to pay, again, for the entire recruitment process, including advertising, interviewing, and training a new staff member. Recruiting a new team member can cost up to 3 months’ salary in direct costs and lost productivity.
The point is, having control over how your team gets paid opens up all these options to get the best value from your offshore investment.
How does MicroSourcing structure fees and salaries?
We hear it a lot: “Surely there’s a markup on staff wages to cover your services.” Actually we don’t add any markup at all.
MicroSourcing pays attractive local salaries and makes zero margin on the labor. It’s just one of the many reasons to choose MicroSourcing. And it’s what sets us apart. Transparent staff salaries mean we can attract – and keep – the best employees, and our staff earn a living wage to support their families. We make sure they feel valued and rewarded for their work, and as a result, MicroSourcing’s staff turnover rate is less than half the industry average.
Our fixed, transparent service fees include everything you need to make your offshore investment a huge success: the office, furniture, computer, IT infrastructure, management, recruitment and HR. All our prices are completely transparent, so you know you’re getting the best value for your offshore investment.
Want to build a dedicated offshore team?
Since its inception in 2006, MicroSourcing has become one of the biggest managed operations providers in the Philippines. With over 4,000 employees, 7 delivery centers and close to 200 clients, we can help you build a dedicated team in the Philippines, covering all the roles and levels of specialization you require.
To find out exactly what’s included in our service fees, it’s as simple as telling us what you need, so we can give you some indicative salary figures and a summary of our fees. Then one of our offshoring specialists will give you a call to answer all your questions. After that, you can have your offshore team up and running in as little as 6 weeks.