Business Process Outsourcing (BPO) companies employ over 1.2 million people in the Philippines. BPO is common practice for businesses looking to cut costs but there are pros and cons to outsourcing in this way.
There are several ways to outsource to the Philippines. This blog will explore where BPO’s fall short and how businesses looking to outsource to the Philippines can use outsourcing alternatives.
What is BPO?
BPO is the subcontracting of whole business processes to an external company. The staff carrying out these processes are hired, managed and trained by the BPO company. Business Process Outsourcing to the Philippines is popular but not the best fit for every business process.
Recent BPO trends
In recent years, customer success has become a critical factor in business growth. As a result, the quality of service that can be delivered by BPO services has started to fall short of rising employee standards.
Companies looking to optimise the delivery of their services using outsourced employees are starting to question the viability of BPO services.
In addition, recent press has highlighted the mistreatment of employees in BPO call centres. Employees are subjected to salaries as low as USD93 and unfair sales quotas they must meet to keep their jobs.
These BPO management structures leads to a high turnover of staff. As a result, more and more companies are firing their BPO’s due to poorly trained staff, a lack of control of their business processes and negative press on employee welfare.
BPO Model in the Philippines
BPO companies in the Philippines hire large volumes of staff that are trained to their own standards. Business process outsourcing in the Philippines typically involves hiring out entire call centres of workers to fulfil customer service and technical support needs to multiple companies at once. The shortcoming of a BPO lies in the lack of control the hiring business has over employee training, turnover and support.
BPO management strategies usually involve keeping salaries as low as possible, favouring a higher turnover of staff. As employees get better at their jobs, their quotas are increased making it harder to keep their jobs.
This strategy ensures that salaries and levels of expertise within BPO’s remain at the entry level.
What is an Employer of Record (EOR)?
An Employer of Record Service is responsible for the salary, social security and contracts of employees. Use of this service allows you to hire employees in the Philippines without needing a legal entity in that country.
By using an Employment of Record service, you still manage your employees and thus maintain control over how much your employees are paid, how they are trained and supported.
Pros and Cons of BPO vs EOR
Several businesses are starting to make the switch from BPO’s to EOR services as the benefits of maintaining complete control of employees and how business processes are carried out are numerous.
Management of Processes and Employees
In outsourcing your processes to a BPO, you lose control over how your tasks are being monitored and performed. The result is you get less transparency on where things are going wrong. You are therefore less able to optimise outsourced business processes in line with your company policies and values.
This can be seen particularly in the outsourcing of customer service and technical support. These business processes are best kept in closed loops.
Not only do you need to train your support teams, but you also need to receive immediate feedback to ensure the delivery of your products and services is optimised for your end-user.
In this case, outsourcing to the Philippines through a BPO isn’t the best option. Instead, enlisting an EOR service allows you to maintain all the control that’s necessary for optimising your business processes.
Turnover of Employees in Business Process Outsourcing
As a client of a BPO, you won’t know who is working for you. BPO’s typically experience a high turnover of staff, so you will also be unaware how often staff are replaced. This high turnover plays a huge role in reducing the quality of output. It also means that a larger number of people will be privy to the processes and company information that you share with your BPO company.
Training of Employees
BPO have their own training and onboarding processes which are optimised for their high turnover of staff. The training and support personalised to the business process you are outsourcing to the BPO is very limited.
Many businesses prefer this hands off approach to outsourcing their business processes. Particularly for menial jobs that don’t require much training. Most enterprise sized businesses choose to outsource customer service to BPOs. But in many cases, these companies start to gain a reputation for having poor customer service.
Companies that want to outsource more complex jobs or want to ensure a high standard of service for their customers prefer to outsource to an Employer of Record service.
The EOR model of outsourcing allows businesses to maintain full control of how employees are trained and how their business processes are carried out.
Cost of Employment
BPO companies hire their own employees and thus decide on the level of experience and quality of their staff. Employees of BPO companies tend to work with multiple companies at once. Therefore, the cost of using a BPO could be lower than hiring employees through an EOR that work exclusively for your company.
An Employer of Record service such as Emerhub can also recruit talent for you as part of the deliverables. You can specify the kind of employee you want and their level of expertise. The potential for a long-term and cost effective solution is much higher with EOR employees.
Maintaining your company ethics
You may have heard a lot of negative press about major companies outsourcing their manufacturing to countries such as Bangladesh where workers are underpaid and have poor working conditions. These large factories usually manufacture products for multiple companies and are run by BPO companies.
The cost benefits for outsourcing with a BPO are clear, but because the workers are being managed by the BPO, working conditions and employee welfare are not within your control.
Which systems are used by BPO companies?
Due to the large volume of employees within one call center, BPO companies have difficulty adapting to new clients. BPO call centres run on their own software, not the software used by their clients. This is another factor that contributes to the lack of transparency on business processes.
The rigidity of these systems and large call centres has led to great difficulty for BPO businesses during COVID. Social distancing laws and work from home policies don’t favour the BPO model.
The flexible nature of the EOR model has caused an influx in the amount of interest in EOR services in the Philippines.
EOR providers like Emerhub take care of all things HR related to the employee from payroll to the provision of contracts. Amidst the logistical difficulties of covid regulations, EOR providers like us can also provide office space with stable wifi when required.