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Offshore Labour - Three Myths Busted

There are a few arguments that pop up from time to time concerning whether using offshore staff is ‘right’ or not. The three main issues regarding employing ‘offshore staff’ are:

 

1. Sweatshops

2. Slave wages

3. “Oh my God, all our jobs are going offshore!”

All a bit dramatic. But there is some truth in all of these issues. Not much, but some. Let us explain in a bit more detail.

 

1. Sweatshops

Filipino workers are backed by a strong, employee biased Labor Code, which is enforced by the Department of Labor. The bias against employers is similar to that faced by employers in the West. As an employer, we have to comply with a suffocating set of rules and regulations.

 

Let us describe a typical office and working environment for a foreign company in the Philippines.

  • Staff work in modern, air-conditioned offices that are equipped with the same technology you would find in the office of a western accounting firm

  • When staff work overtime, they get paid for it

  • Employees get 20 days leave each year, along with a significant number of public holidays. Many workers also receive a health card for themselves and a dependent. Their employer usually pays for this

  • We can tell you that in our office, staff work on new computers with dual monitors and up-to­-date software

 

Hardly a sweatshop environment, is it? The media love a dramatic story. They sell more newspapers like that, but the reality for most employees is that this isn’t the case.

2. Slave Wages

There are places paying illegally low wages, but it’s not the norm. And yes, our staff earn a fraction of what their western counterparts do. We know most people spend what they earn, usually by buying useless crap. The Filipinos are no different when it comes to saving, it’s just the numbers are smaller and the spending is usually to support elderly parents or siblings going through college. Here, you need to look at both income AND expenses.

 

Let’s break down some numbers. You are an accountant so this will probably get you excited.

  • Typical salaries for accounting staff are between US$500 and US$1000 per month.

  • A taxi in the UK costs about 20 times more than a taxi in the Philippines.

  • A pack of cigarettes in Melbourne costs about A$20. It’s less than A$2 in Manila.

  • A movie costs least A$20 in Australia. About A$5 in Manila.

  • The same ratios exist across other things such as food, accommodation and public transport. Cars and electronic goods aren’t cheaper, but almost everything else is.

 

So, if someone earns the minimum wage in the Philippines, they will struggle. It’s the same in any country. All of our staff earn more than the minimum wage, and most earn much more. So we can tell you firsthand that the slave wage issue simply isn’t a reality for most employees.


3. "Oh my God, all our jobs are going offshore!"

There are a couple of ways of looking at this issue. Firstly, routine roles such as call centres or back office processing work are now predominantly done in places like the Philippines and India.

We don’t see the same thing happening to the same degree to accountants. The firm of the future, in our mind, will have client-facing staff in their home country, with the processing work (bookkeeping, low end tax work, financial statements, compliance, etc.) being done offshore in a cheaper location. Technology will play a big part, but we have our doubts as to the extent it will come into play anytime soon.

We can also tell you that although we employ a significant number of people in the Philippines, not one single job has been lost in Australia, the UK, or USA because of this. While more processing work is being performed offshore, western staff are doing more value­-added and client -facing sales work.

And the reality is, most firms won’t adopt an offshore model anyway. It’s a place reserved only for the movers and shakers in the industry.

So yes, some jobs will move, but it’s not as dramatic as the media makes out. Therefore, as the owner of a firm, you ought to consider running it how you see fit, not how some nosey do-­gooder (who has usually  never run a business  or employed  anyone themselves) wants you to run things.

For further information about Frontline please email mktg@frontlineaccounting.com

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