What Are HR Services & Why Are They Outsourced?
HR services pertain to any type of support in human resource management provided by a third party. The objective is to help organizations enhance their human resource management, such as by enhancing operational efficiency, improving compliance with regulations, boosting employee satisfaction and retention, and more.
Having a good human resource management is key to the success of any organization. It ensures that companies have great talent, that employees are engaged and performing, and that the company is a great place to work overall.
However, not all organizations have the resources to staff their own in-house human resources team, hence more companies are choosing to outsource HR services. The growing popularity of HR outsourcing services or human resource outsourcing (HRO) is reflected in the size of the global human resource outsourcing market, which was sized at $18.65 Billion in 2023, estimated to be $19.97 Billion in 2024. And with a 7.59% annual growth, the market size is expected to reach $31.14 Billion in 2030.
Not only is outsourcing a great option for those looking to optimize resources, it’s also a great way to unburden one’s inhouse team. Running human resource operations effectively requires expertise in several areas such as compliance and risk management, compensation and benefits, health and safety, and more. Sourcing these expertise can be challenging. And with the added burden of needing to scale operations, companies choose to outsource their human resource functions rather than operate it in-house.
Why Do Companies Outsource HR Services To The Philippines?
With so many HR outsourcing companies globally, the Philippines is emerging as one of the leading destinations mainly for its lower labor costs, excellent English, cultural compatibility, and excellent track record in the business process outsourcing (BPO) industry.
Lower Labor Costs
When people think of the Philippines, the first thing that comes to mind is cost savings. This is because the Philippines is a developing country with a lower cost of living, hence lower labor costs. To illustrate, the average hourly wage of an HR specialist in the United States in 2024 is $36, meanwhile, it costs ₱144 (approx. $2.46) per hour in the Philippines.
With such a huge difference, even with the additional costs that come with management, resources, and benefits, the overall cost to outsource HR services to the Philippines is still around 70% lower than hiring a full-time staff onshore in the United States. This appeals to many global companies attracting them to outsource to HR outsourcing companies in the Philippines.
Excellent English
When it comes to outsourcing, smooth collaboration is key to success. And Filipinos are known for their excellent English communication skills, what with the country ranking 2nd in English proficiency across all of Asia and English being used as the primary language in Philippine education. These result in majority of Filipinos speaking excellent English, making the Philippines particularly attractive as an outsourcing destination to native English speaking countries, like the United States, UK, and Australia, contributing to the high demand for HR outsourcing in the Philippines.
Cultural Compatibility
Besides communicating well in English, Filipinos are also culturally similar to developed nations, particularly, the United States. This is because they were a United States colony for 48 years, and because they consume so much American pop culture. For this reason, Filipinos have an easier time understanding nuances in North American culture, aiding communication and resulting in better collaboration.
Good Reputation in BPO
The history of Philippine business process outsourcing (BPO) industry dates as far back as the 1990s. This puts the Philippines ahead of many other nations in the outsourcing market. With decades of head start, the Philippines has built a strong reputation as a reliable outsourcing market with reliable tech infrastructure, governent incentives, and over 800 BPO companies. This gives many global companies the confidence to work with Philippine BPO agencies, trusting their expertise and experience for high quality HR services.
How Do You Outsource HR Services To The Philippines?
If you’ve never outsourced before, you may be unsure as to how you can start outsourcing HR services to the Philippines. We’ve broken down the steps to outsource HR services to the Philippines in 5 easy steps below!
Step 1: Assess Your HR Needs
Before starting any business venture, such as outsourcing, first evaluate your current operations and determine your needs. Are you finding it difficult to find staff for your HR positions? Does the volume of HR work not justify hiring staff full time? Do you expect fluctuations in your HR operations that would require you to scale quickly?
After clarifying your needs, consider the benefits of outsourcing your HR functions to the Philippines. With the geographic distance, collaboration will be done virtually. Will you be able to operate without HR staff on-site? How about cultural and language compatibility? While Filipinos have built a reputation for working well with Western brands, there are still brands that require local HR staff. Will this be an issue for you?
Step 2: Determine HR Roles To Outsource
Once you’re certain that outsourcing to the Philippines is the right business strategy for your HR operations, the next step is to identify which HR roles you need to outsource. The most commonly outsourced ones include general HR, compensation and benefits, payroll, training and development, and recruitment.
Then, determine how many of each HR role you need, and of which seniority. Are there particular skills you require for these specialists? Will they need to know how to use proprietary tools like Workday, Bamboo HR, and Zenefits? Be clear on these as you’ll use these when shortlisting the BPO companies you want to work with.
Step 3: Choose A BPO Company
With clear roles to outsource and skills required, it’s time to choose a BPO company that specializes in HR services in the Philippines. The easiest way is to start with the top HR companies in the Philippines, then select based on your unique needs.
Assess the outsourcing companies based on their expertise, track record, contract type, timeline, and costs.
It’s best to work with a company that has provided outsourced HR services to companies similar to yours in terms of size, industry, and geographic location. This reduces the learning curve, easing transition and minimizing operational disruptions.
You also want to consider the contract type when choosing a company to work with. You may need full-time offshore staff for long-term or you may need them to fullfill one off projects only. Depending on the outsourcing arrangement you need, the length of contract or terms, and the costs will determine the best company to work with.
A quick way to assess these is to meet with these companies and discuss how they may meet your requirements, and on what costs and terms. You may set up a quick consult here.
Step 4: Discuss Terms & Conditions
Once you’ve decided to work with an outsourcing partner, it’s time to discuss the terms and conditions. Though these should have already been brought up during initial discussions when choosing your outsourcing partner, you should discuss these more thoroughly within the context of a working partnership with your chosen BPO company.
Some of the things you want to pay close attention to include scope of service, service level agreements (SLAs), key performance indicators (KPIs), confidentiality and data protection, compliance with local and international laws, contract duration and renewal terms, termination clauses, dispute resolution mechanism, responsibilities and liabilities, quality assurance (QA) measures, communication protocols, and change management process.
Step 5: Transition & Onboard Your Offshore HR Team
Once you’ve signed the contract, your partner BPO company will be hiring, vetting, and training your offshore HR team to ensure they meet your requirements. Once this is done, they’ll be onboarded, equipped with tools to fulfill your tasks, as well as taught your process and given access to your systems to help them integrate into your operations.
With your offshore HR team onboarded, it’s time to work with them, with your outsourcing partner managing your offshore team on your behalf to ensure quality of work, and that their efforts align with your business objectives.
Outsource HR Services to the Philippines
Outsourcing HR services to the Philippines for the best results shouldn’t be difficult. With clear goals, the right outsourcing partner, and great collaboration and communication, you can expect great results!
At KDCI Outsourcing, we’ve supported several brands, from SMEs and startups to multinationals, with their human resource functions. With over a decade in the industry, we’ve built a strong reputation for building the best offshore teams in the Philippines. We don’t just find people with the experience and skills you need, we look for people who mesh well with your team, making it so that your outsourced team feel inhouse, helping you achieve your business goals.
Learn more about HR outsourcing in the Philippines. Contact us today!
