The Ethics of Offshoring: Navigating Labor Costs and Working Conditions

Last Updated on 2024-10-11

The Philippines is considered a top destination for offshoring. Businesses worldwide are tapping into its vast talent pool and taking advantage of its economic incentives.

But what do you really know about the country? Is it safe to hire talent halfway across the world? What are the working conditions like?

Learn how the country’s BPO industry became one of the largest economic sectors, raking over $25 billion annually. If you’re considering offshoring to the Philippines, here are some key things you’ll want to know first.

Understanding the Landscape

Before we dive into the ethical concerns of offshoring in the Philippines, it’s important to understand how it got started. BPO in the Philippines kicked off an economic boom, which is a primary driver of today’s economy.

Here’s a little overview of how the BPO industry in the Philippines began:

The story was in 1995 when the Philippine Congress passed the Special Economic Zone Act, setting the stage for a major boom in the country’s BPO industry. This act did two key things: it established the Philippine Economic Zone Authority. It also offered tax breaks and relaxed development requirements. These perks attracted foreign companies looking to set up shop offshore.

Not long after the act was passed, SYKES, a multinational call center, became one of the first players in the game in 1997. This got the ball rolling, and companies gradually began investing and outsourcing their services to the country.

By 2010, the Philippines was crowned the BPO industry capital of the world, with 525,000 employees in call centers. Today, it generates billions in revenue and is a huge contributor to the country’s economic success.

Greater Demand for IT Outsourcing

Over the years, the BPO sector in the Philippines has expanded into various industries, with one of the most rapidly growing sectors being IT. With the Philippines having an oversupply of IT graduates while there’s a talent shortage abroad, it couldn’t be a better partnership. Outsourcing became a win-win solution.

Today, many talented software developers in the Philippines work for multinational companies. Full Scale, for one, hires software developers from all over the country. We’ve been tapping into the local pool of IT professionals, partnering with universities, and offering internship opportunities for aspiring IT students.

Learn more about our story:

• Why Full Scale’s Founder Initially Avoided Offshore Development
• How Full Scale Fixed Offshore Development

Offshoring in the Philippines: Ethical Considerations

Now that you know the country’s offshoring landscape, it’s time to discuss its more technical aspects. Particularly how most investors work their way around recruiting local talent. Here are some key factors to consider before going into business.

Ethical Considerations in Labor Costs

Labor cost savings are often the primary driver for offshoring. The cost of living in the Philippines is significantly lower than in many Western countries, allowing businesses to achieve substantial savings while offering competitive salaries by local standards. However, ethical offshoring goes beyond just following minimum wage laws. It involves ensuring wages cover basic needs and reflects the work’s value and quality.

To do this ethically, businesses should use transparent wage-setting practices that consider living wage standards in the Philippines. This ensures that salaries are not only legally compliant but also ethically justifiable. 

Adhering to Local Government Laws

With the BPO employing over 1.15 million people, local policies are constantly being improved to accommodate foreign businesses. Over the recent years, the Philippines has been revising its foreign investment law to ensure investors’ and employees’ safety and fairness.

One of the highlights of these policies is how tax incentives are doled out to qualified international firms. You can enjoy lower or even zero tax rates by ramping up your workforce, providing more training and career opportunities, sourcing locally, and reinvesting their profits. This tax break is part of Package 2 of the comprehensive tax reform program, which is all about slashing corporate income tax (CIT) and modernizing the fiscal incentives system.

This means that starting your business in the Philippines could be a lot more cost-effective, especially as you grow and need more people to keep things running smoothly. Companies with labor-intensive operations stand to benefit the most from these tax incentives. Plus, meeting these requirements can boost your company’s reputation in the local market, helping you make a name for yourself in the industry.

And if taxes were a headache before, they’re getting a lot simpler now. The Philippines is revamping its tax policies, making it easier for investors to file their taxes. Whether you want to file electronically or go old-school with paper, the Bureau of Internal Revenue (BIR) makes it more convenient through authorized agent banks or software providers.

Prioritizing Working Conditions

Beyond labor costs, working conditions are a significant concern. Ethical offshoring involves providing work environments that prioritize employees’ health, safety, and well-being. This includes ergonomic workspaces, reasonable work hours, healthcare access, and professional growth opportunities. In the Philippines, where the culture values kinship and social harmony, creating a supportive and inclusive work environment is also crucial for ensuring high levels of employee satisfaction and engagement.

Companies that offshore to the Philippines have the opportunity—and responsibility—to set a positive example by implementing practices beyond local regulatory requirements. This benefits the employees and enhances the company’s reputation, making it an employer of choice.Full Scale software developers receive full benefits, from mandatory government benefits to health and wellness allowances. We prioritize our members’ well-being and ensure they feel included. Every year, we organize several team development activities to allow everyone to bond and get to know each other. On top of that, we also encourage members to join hobby-based clubs so they can share their interests beyond work. 

A Collaborative Approach to Ethical Offshoring

Achieving ethical offshoring is not a unilateral effort; it requires collaboration between the offshoring company, local businesses, and the Philippine government. Encouraging open dialogue about labor standards, wages, and working conditions can lead to the development of best practices that benefit all parties involved.

Furthermore, investing in community development and educational programs can help uplift the local workforce. You create a positive impact beyond the immediate business operations sphere.

Conclusion

By taking a thoughtful approach to offshoring, you meet your business goals and show respect for your offshored teams.

Ultimately, ethical offshoring is all about creating situations where everyone wins. Your company thrives while still respecting the rights and welfare of its employees. It’s proof that success in the global market can happen with integrity, respect, and a commitment to fairness.

Offshore with Full Scale

If you plan to offshore in the Philippines but aren’t sure how to get started, don’t fret – Full Scale’s got you. We specialize in staff augmentation, helping businesses build their offshore software development team efficiently. Our goal is to match you with highly skilled professionals who fit your project requirements perfectly.

Why Choose Us?

We’ve been in the offshoring business for over 5 years, even listed in Inc. 5000’s list of fastest growing companies. Our Philippines office is based in Cebu City, while our US team is in Kansas City, Missouri. 

With Full Scale as your partner, your offshore team is guaranteed the best working conditions, equipped with the right tools, training, and compensation. Here’s what you can expect from us:

• Top-Tier Talent: We find the best talent in the tech business. You’ll get a dedicated team of experts whose skills perfectly match your project needs.
• Seamless Integration: We guarantee that your offshore team integrates seamlessly with your in-house team.
• Ethical Management: Everyone on the Full Scale team is treated with respect and integrity. We foster a safe and harmonious working environment. 
• Quality Service: Our software developers are given the best quality tools, training, and resources to do their work. 
• Full Compliance: Having been offshoring in the Philippines for over five years, we know how to navigate local laws pretty well. We comply with all legal requirements in employing Filipino experts.

Hire Offshore Developers Through Full Scale