Building an in-house team in the USA involves various costs, including salaries, benefits, office space, and equipment. Salaries can range widely, with tech roles often commanding $75,000 to $150,000 or more annually, and operational roles like marketing, sales, and administration varying from $40,000 to over $100,000. Benefits, including health insurance and retirement plans, can add an additional 20-30% on top of salaries. Office space and equipment costs depend on location and needs but can significantly increase total expenses. For a small team, annual costs can quickly sum up to several hundred thousand dollars, with exact figures depending on the team's composition, the company's location, and the benefits package offered.
Meanwhile, the cost to outsource in the Philippines varies based on each job function. For example, if you are looking to outsource to a call center, the average cost for a customer service rep is $5.00/hour on the low end and $12.00/hour on the high end.If you want a more comprehensive price and breakdown of costs, it will vary from one outsourcing company to another. However, more often than not, the standard pricing cost to outsource model is based on certain computation.
Standard Pricing Model
The cost to outsource is usually calculated based on the skill of the resource, the number of people you want to hire, and the tenure of the contract. In the Philippines, outsourcing companies calculate fees based on workforce cost, service fees, and government-mandated benefits. This allows an outsourcing company to come up with unique service models to fit their respective target markets.
1. Workforce Cost
All workforce cost is always charged to you since the cost to outsource are driven by the market rates for the positions you want to fill. Moreover, these costs will vary depending on skill level — whether entry-level, experienced, or expert prospects. For example, an entry level graphic designer will cost 30,000 PHP (534.66 USD) and an expert may cost more than 43,000 PHP (766.35 USD).
Note: Conversions will vary from time to time, depending on exchange rates (1 USD = 56.12 PHP, as of February 2024)
2. Service Fees
Every outsourcing company will have its respective service fees as part of the cost to outsource, which generally include a fixed fee per employee per month to cover all their operating expenses. These operating expenses will typically cover equipment, utility bills, taxes, and more. Some outsourcing companies will give you perks depending on the total size of your outsourcing team, which may or may not be part of your negotiation stage.
3. Government-mandated Employee Benefits
As prescribed by the Philippine labor laws, each employee is entitled to several benefits like the following. Don’t worry, your outsourcing partner will handle all of these for you as this is part of the business' cost to outsource and it is under its payroll department. Feel free to have them explain this in detail once you come into contact.
13th-month Pay
Another part of businesses cost to outsource is the employees' 13th month pay. According to the Philippines’ Department of Labor and Employment, the 13th-month pay is equal to 1/12 of the basic salary of an employee. This is usually given at the end of the year, with pro-rated values depending on the start date of the employee.
Night Differential
The Philippines is hours ahead from the US, and this depends on which state you are in (Washington DC = 12 hours, California = 15 hours). If you want your outsourced team to work at your hours, they are entitled to a night differential pay of not less than 10% of their basic salary, which is usually $400 above based on an average monthly compensation of $4,000.
SSS (Social Security)
Social security contributions are shared by the employer and the employee and is a part of the cost to outsource business services in the Philippines. As of 2024, the contribution rate is 14%, with 9.5% shouldered by the employer and 4.5% by the employee. The rates vary every year, and may reach 15% by 2025.
PAGIBIG
PAGIBIG is pretty much the government’s way of ensuring that the Filipino workforce will have savings going while they work. This is usually for housing purposes, or when an employee needs to borrow money. An employer's contribution rate is 2% of their employee’s basic salary.
PhilHealth
As of 2020, the PhilHealth premium rate is 4% to 5%, again depending on the employee's monthly salary. This serves as a health insurance benefit, albeit some outsourcing companies still give a separate health insurance benefit from a private provider because healthcare in the Philippines is expensive.
Build a Team With KDCI
After having an overall idea about how it costs to outsource in the Philippines, the challenge now is to balance cost-effectiveness, the quality of the service you’ll get, and how well your needs will be met.
Partner with an outsourcing company like KDCI who can build you an offshore team based on your custom requirements. This way, you’ll only invest in the resources you need, when you need them, all without sacrificing quality. You also won’t be tied to fixed pricing commitments.
Contact us today to learn more about our services.
Published: May 27, 2015
Updated: February 27, 2024
