by: Sarah Joson
Pasig City Representative Roman Romulo said the reasonable increase in salary will not inhibit the growth of the business process outsourcing sector (BPO) of the Philippines. He noted that the government-mandated P15 inrcease in the daily minimum wage (for private sector workers in Metro Manila) will not prevent BPO clients from expanding operations or choosing the country as an outsourcing destination.
College-educated and highly skilled BPO workers are already receiving higher wages. However, some of these employees may not be included in the increased minimum pay, but adjustments will still be working in their favor through distortion.
The Labor Code defines wage distortion as “a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills, length of service, or other logical bases of differentiation.”
As a result, employees who are not directly covered by the increase are given appropriate pay hikes to correct wage distortion.
Romulo added that the fair wage hike will not taint the country’s attractiveness as an investment destination. He also pointed out that other neighboring countries and competitors in the outsourcing segment are increasing wages faster than the Philippines.
He also reported that the instability of the foreign exchange rate affects BPO operations more than wage increases do, because BPOs earn in US dollars, but spend for wages and operations in Philippine peso. The weaker the peso is, the more beneficial it is to BPO firms.
At Jobstreet.com’s Jobs and Salary Report for Fresh Graduates, it was discovered that business process outsourcing provides the easiest means for fresh graduates to get jobs. In fact, the top five specializations for fresh grads are related to the BPO/call center sector which are IT/Computer - Hardware, Technical and Helpdesk, Telesales and Telemarketing, and Clerical/Administrative Support.
It was also discovered that the information technology (IT) sector has high-salaried jobs.
According to Yoda Buyco, Marketing Director of JobStreet.com Philippines, the report is based on the job opportunities posted at JobStreet.com from January to March 10, 2015. Thirty percent of the job openings are related to voice-based operations or call center work.
There are also vast opportunities for fresh grads in non-BPO industries such as Finance - General/Cost Accounting, Human Resources, Banking/Financial Services, Hotel Management/Tourism Services, and Marketing/Business Development.
However, Buyco pointed out that the sector of the industry offers the highest paying jobs which include the IT/Computer Hardware-related jobs offering P24, 000 for fresh graduates, and jobs in the Network/System/Database Administration, Technical/Helpdesk Support segment are pegged over the P21,000 monthly salary mark.
by: Sarah Joson
At “Where in the World? Business Process Outsourcing (BPO) & Shared Service Location Index” created and published by global real estate adviser Cushman & Wakefield, it was revealed that Vietnam is now the global leader in outsourcing. Key indicators that define a worthy outsourcing destination include costs, risks, and operating conditions.
Richard Middleton, Head of EMEA and Asia Pacific occupier services at Cushman & Wakefield, said based on the pricing, Vietnam is still more economical compared to other global destinations like India and China, where wages continue to rise. However, amidst the rising cost and shrinking available skilled talent pool, India is still the leader in the global outsourcing segment by market size.
At C&W’s report last year, Vietnam was fifth place and since it has established itself as an alternate destination for affordable offshore outsourcing services, it gradually rose to take the lead. The government of Vietnam has implemented new rulings to promote its outsourcing sector.
On the other hand, the Philippines moved up one spot to second place as its BPO market continues to expand, driving the economy forward. The BPO market of the Philippines posted its highest ever earnings last year at US$15 billion. Moreover, it was reported that the country has absorbed 70 percent of India’s voice operations where it was discovered that the shift in power has affected the cost of labor in India, which also contributed to the rising rate of attrition at 26.9 percent, the highest in the world.
Global economies are still recovering from the economic slump, and the BPO sector is propelled by English-speaking developed countries, making the Philippines a strong candidate for outsourcing since the English communicating abilities of the Filipino workforce are well received in the US - ahead of other countries.
According to Danilo Reyes, Chairman of the Information Technology and Business Process Association of the Philippines (IBPAP), on the heels of the positive performance of the business process outsourcing (BPO) industry of the country last year where at least one million jobs were created and earnings reached $18 billion, numbers posted could further grow in 2016 to $25 billion (P1.118 trillion) in earnings, and 1.3 million direct and indirect jobs.
Reyes added in his speech during the 2015 Asia BPO Summit that producing one million jobs is a milestone, considering that the sector only had 2,000 employees 16 years ago.
The BPO sector is one of the major contributors to the country’s growth through job production and earnings. It’s almost at par with the remittance of overseas Filipino workers. However, BPOs still face the challenge of having a high turnover rate amongst workers.
Shore Solutions Chief Executive Officer Darcy Lalonde pointed out that people should have proper training for BPO work. Pushkar Misra, CEO of Hinduja Global Solutions, said Filipinos are very knowledgeable when it comes to technology and there are ways where it can be maximized. Meanwhile, Marcel Greutmann, General Manager of the Services Integration Hub East of IBM, said majority of the activities in the IT segment of the BPO sector can be found in mobile technology. He added that there are numerous opportunities in the segment as the adoption and innovation of mobile gadgets continue to rise.
The Information Technology and Business Process Association of the Philippines (IBPAP) recently submitted a position paper on pending Senate Bills 35 and 987 under the Fiscal Incentives Rationalization (FIR) to Senator Juan Edgardo Angara, Senate Committee Chairman on Ways and Means, as well as Trade and Industry Secretary Gregory L. Domingo, seeking to retain tax incentives that are received by organizations in the services segment. These bills aim to remove the income tax holiday (ITH) and minimize the availability of the five-percent tax on gross income earned (GIE).
In the position paper, the association cautioned that should tax incentives be removed or changed, it could adversely affect the industry and economy because BPOs could move operations to Latin America and African countries where the cost of business is lower, better incentive packages are available, and the talent pool is similar with the Philippines.
IBPAP also pointed out that some BPOs which have established operations in the Philippines have expanded in neighboring countries such as Malaysia and China. Information Technology and Business Process Management (IT-BPM) companies are also said to be considering Latin America, Africa, and Costa Rica mainly because of the similarities of their fiscal incentives with the Philippines’.
IBPAP is the industry body that helps facilitate and protect the projects of IT-BPM, one of the country’s leading sectors. IBPAP has more than 300 member organizations and five firms representing 900,000 direct workers and an estimated 2.2 million indirect employees.
According to a report done by the Institute of Chartered Accountants in England and Wales (ICAEW), the Philippine economy is predicted to grow this year, albeit still short from reaching the government’s 7-8 percent growth target.
ICAEW anticipates the country’s growth to clock in at 6.2 percent this year, marginally higher than the 6.1 percent it posted in 2014.
The institution said the country still faces several challenges that are seen to stunt its growth. These include infrastructure problems and major power outages. A possible solution seen by the ICAEW is stronger public financing to support infrastructure projects.
Last year, the economy posted a growth of 6.1 percent, much slower than 2013’s 7.2 percent. The growth figure also didn’t reach the government’s 6.5-to 7.5-percent goal. However, it was the second fastest in Asia.
The Aquino administration already rolled out nine projects worth about P135 billion to reinforce public-private partnership programs back in 2010.
Last year, it was announced that another P625 billion worth of projects are being set to further support the country’s infrastructure and domestic economic growth.
The Philippines’ ability to provide cost-effective and scalable solutions to global investors is one of the top reasons why business process outsourcing is thriving in the country.
During last year’s fourth quarter, office space occupancy was said to have skyrocketed in renowned business districts such as Bonifacio Global City, Makati, Ortigas, Quezon City, Alabang, and Pasay City. As a matter of fact, vacancy rates for Premier and Grade A buildings in Metro Manila dropped from 2.53 percent to 2.13 percent quarter-on-quarter.
As the demand for office space continues to intensify, landlords have been seen increasing leasing rates - P1,306.08 per square meter for Prime office space and P898.87 for Grade A in Makati CBD. As for Bonifacio Global City, the rate is now P848.34 per sqm; P604.71 per sqm in Ortigas; and P606.84 per sqm in Alabang. As for Quezon City, rate is P627 per sqm and in Pasay - P650.47 per sqm.
Rick Santos, Chairman, founder, and CEO of CBRE Philippines, said amidst the price hike in rental rates in major business districts, investors are still willing to pay for the quality and value they can get by operating and expanding in the Philippines.
One of the strategies that developers are looking at to address the growing demand is augmenting projects within and outside the Manila’s business districts.
Investor interest has also been observed in ‘sunshine’ industries which include hotel and leisure, retail, and gaming.