Working PaperPDF Available

Business Process Outsourcing in the Philippines: Challenges for decent work

Authors:
Lorenza Errighi , Sameer Kh a t i w a d a and Charles Bodwel l
December 2016
I L O A s i a - P a c i f i c W o r k i n g P a p e r S e r i e s
Busi nes s p roc ess ou t sou rci ng i n t he Phil ip pine s:
Chal len ges fo r d
ece nt
w
ork
ILO Asia-Pacific Working Paper Series
Business process outsourcing in the Philippines:
Challenges for decent work
Lorenza Errighi, Charles Bodwell and Sameer Khatiwada
December 2016
D
ecent Work Technical Support Team for East and South-East Asia & the Pacific ii
Copyright © International Labour Organization 2016
First published 2016
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Errighi, Lorenza; Khatiwada, Sameer; Bodwell, Charles
Business process outsourcing in the Philippines: challenges for decent work / Lorenza Errighi, Sameer
Khatiwada and Charles Bodwell; International Labour Organization. – Bangkok: ILO, 2016
(ILO Asia-Pacific working paper series, ISSN: 2227-4391; 2227-4405 (web pdf))
International Labour Organization
outsourcing / value chains / foreign investment / decent work / employment / wages / working conditions /
labour standards / Philippines
12.07.2
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D
ecent Work Technical Support Team for East and South-East Asia & the Pacific iii
Preface
The International Labour Organization (ILO) is devoted to advancing opportunities for women and men
to obtain decent and productive work. It promotes rights at work, decent employment opportunities,
more effective social protection and improved dialogue with respect to work-related issues. As
countries in the Asia-Pacific region navigate a sustainable recovery from the global economic crisis,
the ILO Decent Work Agenda and the Global Jobs Pact provide critical policy frameworks for
strengthening the foundation for a more inclusive and sustainable future.
Advances in information and communication technology (ICT) have facilitated growth in the business
process outsourcing (BPO) sector, and the Republic of the Philippines ranks among the world’s major
BPO destinations. The BPO’s economic influence in the country has tripled in the last ten years. Low
labour costs, a highly skilled workforce and competitive ICT infrastructure have provided the major
drivers for this growth. While contact centres represent the most important subsector in terms of revenue
and employment, higher value added subsectors are also growing. BPO is expected to expand rapidly
in the coming years, further strengthening the country’s participation in global supply chains (GSCs).
At the same time, this sector faces numerous challenges related to decent work. Employing a qualitative
survey of the industry, this paper reveals four key findings: i) a real danger of skills shortages threatens
as employers struggle to find correctly trained workers and, once they are hired, to retain them for
longer periods; ii) employees report high-stress work environments with detrimental impacts on health,
while HIV/AIDS is increasingly prevalent among BPO workers; iii) more than 50 per cent of workers
are women, but they tend to be concentrated in low-paid, low-skilled jobs; and iv) trade union activities
are almost non-existent in the BPO sector. This paper also sheds light on the efforts made by the
Government, the BPO sector, employers’ associations, and universities to address these challenges, and
draws lessons for the future. Continued efforts to provide a stronger voice and representation for
workers could do much to address the challenges of decent work creation.
The ILO Asia-Pacific Working Paper Series, of which the paper is a part, is designed to improve the
understanding of decent work issues, stimulate discussion and encourage knowledge sharing and further
research that will promote decent work in Asia and the Pacific.
Maurizio Bussi
Director
Decent Work Technical Support Team for
East and South-East Asia and the Pacific
Bangkok, Thailand
Decent Work Technical Support Team for East and South-East Asia & the Pacific iv
Contents
Preface………………………………………………………………………...………..…………….. iii
Acknowledgements…………………………………………..…………….……………..……………v
Abstract…………………………………………………………..…………….…………..…………. vi
Acronyms…………………………………………………………..………….……………..………. vii
1. Introduction……………………………………………………..…………….…………………....1
2. Global trends in the BPO industry ……………………………..……………….………………....2
3. BPO in the Philippines …………………………………………..…………….………………..…8
4. Challenges for decent work in the BPO sector…………………..…………….………………….14
4.1 Skills shortages……………………………………………..……………….………………...14
4.2 Employee health and well-being ………………………………..……....................................18
4.3 Women in the sector…………………………………………………..…………….…...……20
4.4 Workers’ voices, collective bargaining and ability to organize ………….……….…….……21
5. Conclusions
…………………………………………………………………….…..…….....23
References………………………………………………………………………………….………….24
Annex………………………………………………………………………………………….…........29
List of figures
Figure 1. Foreign direct investments into India and the Philippines, 1985–2015 ................................... 5
Figure 2. Anticipated influences on future outsourcing decisions cited by firms, 2014 (% of respondents
more likely to outsource as a result of following developments) ........................................................... 7
Figure 3. Value added by sector in the Philippines, % of GDP (2001=100) .......................................... 9
Figure 4. Size of the BPO subsectors in the Philippines (in terms of sales revenue), 2005–13 ........... 11
Figure 5. Employment growth in the BPO sector, 2004–13 (2004=100) ............................................. 12
Figure 6. Wage premium: Ratio of average annual wage in the BPO subsectors to average annual wage
in the Philippines, 2009–13 ................................................................................................................... 13
Figure 7. Profile of companies that responded to the ILO (number of employees covered) ................ 14
List of tables
Table 1. Size of BPO subsectors, in terms of sales revenue (US$ million) .......................................... 10
Table 2. Total jobs in the BPO subsectors in the Philippines .............................................................. 11
Table 3. Economic indicators for the BPO sector in the Philippines, 2004–13 ................................... 29
Table 4. Economic indicators for the contact centre subsector, 2004–13 ............................................. 30
Decent Work Technical Support Team for East and South-East Asia & the Pacific v
Acknowledgements
The authors would like to thank Christoph Ernst and Jon Messenger for their valuable comments and
suggestions regarding earlier versions of the paper. The authors would also like to thank the ILO
colleagues in the ILO Country Office for the Philippines – Khalid Hassan, Hideki Kagohashi and Ma
Lourdes Macapanpan; and special thanks are due to Lurraine Villacorta. The study would not have been
possible without the guidance and supervision of Maurizio Bussi, Director of the Decent Work
Technical Support Team for East, South-East Asia and the Pacific. Any errors are the sole responsibility
of the authors.
Decent Work Technical Support Team for East and South-East Asia & the Pacific vi
Abstract
Advances in information and communication technology (ICT) have facilitated growth in the business
process outsourcing (BPO) sector, and the Republic of the Philippines ranks among the world’s major
BPO destinations. The sector’s economic influence in the country has tripled in the last ten years. Low
labour costs, a highly skilled workforce and competitive ICT infrastructure have provided the major
drivers of this growth. While contact centres represent the most important subsector in terms of revenue
and employment, higher value added subsectors are also growing. BPO is expected to expand rapidly
in the coming years, further strengthening the country’s participation in global supply chains (GSCs).
At the same time, it faces numerous challenges related to decent work. A qualitative survey of the
industry reveals four key findings: i) a real danger of skills shortages threatens as employers struggle
to find correctly trained workers and, once they are hired, to retain them for longer periods; ii)
employees report high-stress work environments, with detrimental impacts on health, while HIV/AIDS
is increasingly prevalent among BPO workers; iii) more than 50 per cent of workers are women, but
they tend to be concentrated in low-paid, low-skilled jobs; and iv) trade union activities are almost non-
existent in the BPO sector. This paper i) sheds light on the efforts made by the Government, the BPO
sector, employers’ associations and universities to address these challenges, and ii) draws lessons for
the future. In general, the paper shows that continued effort in providing stronger voices and
representation to workers could do much to address the challenges to decent work creation.
Key words: global supply chains (GSCs), business process outsourcing (BPO), foreign direct
investment (FDI), employment, wages, working conditions, core labour standards, the Philippines.
The responsibility for opinions expressed in articles, studies and other contributions
rests solely with the authors, and publication does not constitute an endorsement by the
International Labour Office of the opinions expressed in them, or of any products,
processes or geographical designations mentioned.
About the authors
Charles Bodwell is the Senior Enterprise Specialist and Sameer Khatiwada is the Employment
Specialist with the Decent Work Technical Support Team for East and South-East Asia and the
Pacific, ILO Regional Office, Bangkok, Thailand. Lorenza Errighi is a junior economist working
as a consultant with the ILO Regional Office in Bangkok.
Decent Work Technical Support Team for East and South-East Asia & the Pacific vii
Acronyms
ADB Asian Development Bank
AIDS acquired immunodeficiency syndrome
AMEX American Express
ASSOCHAM Associated Chambers of Commerce & Industry
BPO business process outsourcing
CAGR compounded average growth rate
CFA Certified Financial Accountant
CHED Commission on Higher Education
DOLE Department of Labor and Employment
DOST Department of Science and Technology
EILER Ecumenical Institute for Labor Education and Research
EPZ export processing zone
FDI foreign direct investment
GDP gross domestic product
GIC global in-house centre
GSC global supply chain
HfS Horses for Sources
HIV human immunodeficiency virus
HMO health management organization
HR human resources
IaaS infrastructure as a service
IBPAP IT and Business Process Association of the Philippines
ICT information and communication technology
ILO International Labour Organization
IT information technology
IT-BMP information technology and business process management
I-TWSP Industry Training for Work Scholarship Program
KPO knowledge process outsourcing
LGBT lesbian, gay, bisexual and transgender
MBA Master of Business Administration
MNE multinational enterprise
MOA memorandum of agreement
NASSCOM National Association of Software and Services Companies
NOA National Outsourcing Association
NWC next wave city
OBG
OECD Oxford Business Group
Organisation for Economic Co-operation and Development
OSH occupational safety and health
PaaS platform as a service
PEZA Philippine Economic Zone Authority
PPP public-private partnership
PSA Philippines Statistics Authority
SaaS software as a service
SME small and medium-sized enterprise
SMP Service Management Programme
UPPI University of the Philippines Population Institute
Decent Work Technical Support Team for East and South-East Asia & the Pacific 1
1. Introduction
Information and communication technology (ICT) innovation together with increasingly fragmented
production processes have encouraged the outsourcing of labour-intensive services to countries such as
the Philippines. Today, an American consumer living in Memphis, Tennessee, might call the American
Express (Amex) credit card help line and be connected to someone in Manila, who will then provide
them with assistance.
1
Companies such as Amex are taking advantage of the separation of services
production and consumption made possible by ICT innovations. Seeking cost efficiency, companies
may outsource their non-core business processes to specialized third-party service providers, which
may then offshore their labour-intensive operations to developing countries with lower labour costs.
Meanwhile, large multinational enterprises (MNEs) have directly offshored their labour-intensive
services to cost-competitive locations by establishing “global in-house centres” (GICs).
The Philippines serves as a leading destination for business process outsourcing (BPO). This industry,
its growth driven mainly by contact centre services, is expected to reach US$25 billion in total revenue
by 2016 – approximately 7.3 per cent of GDP, nearly equivalent to foreign remittances in terms of
economic importance. BPO sector growth in the Philippines is driven by a host of factors, chief among
them the following: low labour costs; a highly skilled and educated workforce; widespread command
among the workforce of a relatively neutrally accented English language; competitive infrastructure;
and government tax incentives. The BPO sector currently employs 1.3 million workers in the
Philippines and, if recent employment growth trends are any indication of future developments, then
the sector is likely to prove an important source of job creation. Furthermore, average BPO sector wages
tend to range considerably higher than the national average, while more than 50 per cent of BPO
workers are women.
Given ICT innovations and increasingly prevalent automation, however, the Philippine BPO sector will
need to make the transition towards higher value addition and more knowledge-intensive activities.
As this paper shows, the BPO sector in the Philippines faces several challenges vis-à-vis decent work.
Referring to case studies of several large firms operating in the country, structured interviews conducted
for this study indicated the following:
the BPO sector faces an inadequate supply of skilled workers, high turnover and difficulty in
retaining talent, difficulties that will likely be compounded as the sector moves towards higher
value added services;
the sector demands high performance standards, which is in itself not bad, but an in-and-out
(high turnover) sector culture has exacerbated stress-related health issues, and employees tend
not to enjoy a work-life balance (e.g. child care provisions for women workers are rare);
even though women comprise more than 50 per cent of BPO workers, they tend to be
concentrated in low-paid and low-skilled jobs, plus they face obstacles in terms of upward
mobility and equal pay; and
1
Amex is used here only as an illustrative example; it is not one of the companies examined in this study.
Decent Work Technical Support Team for East and South-East Asia & the Pacific 2
given that unions are almost non-existent in the BPO sector, worker voices and representation
remain weak, undermining prospects for decent work.
The following section places the BPO sector’s growth in the Philippines within the context of a global
overview of that industry. Section 3 looks at BPO sector trends in the Philippines, drawing lessons for
future growth and potential challenges. Section 4 draws upon structured interviews conducted for the
purpose of this study, and examines challenges for decent work in the Philippine BPO sector. Section
5 presents the study conclusions.
2. Global trends in the BPO industry
Evolution of the BPO industry has been led by innovations in information and
communication technology (ICT)
Business process outsourcing (BPO) is defined as the transfer of a company’s non-core activities to a
third party that uses information technology for service delivery. Depending largely on the level of
specialization and the type of control the lead firm is willing to relinquish, business processes are
usually outsourced either to an independent third party or to a MNE subsidiary, also known as a global-
in-house centre (GIC). There are two types of outsourcing: i) “nearshoring”, undertaken in geographical
proximity to the lead firm; and ii) “offshoring”, where the service provider is remotely located
(Messenger and Ghosheh, 2010).
2
Indeed, enabled by improvements in ICT, firms have outsourced non-
core activities to locations with lower labour costs, sufficiently high human capital and adequate ICT
infrastructure. (The Republic of India and the Philippines have become the two largest destinations for
BPO.) As a result, BPO has become one of the most important global supply chains (GSCs) in the
service category. In 2012, the industry was worth $100 billion; by 2020, according to estimates, it could
be worth $250 billion.
Companies that outsource their business services come from a wide variety of industries, notably
banking, retail, tourism and medical services. Unsurprisingly, BPO involves a wide range of activities
and is divided into subsectors depending on the types of service provided. BPO services may be
classified in a number of ways, but this paper follows the classification adopted by the IT and Business
Process Association of the Philippines (IBPAP), which specifies seven BPO subsectors: back office
operations; contact centres; software development; animation; data transcription; engineering
development; and digital content creation (Box 1). The BPO sector can also be divided into two broader
categories, depending on whether the services provided involve back-office or front-office operations,
the latter involving consumer support services through direct interaction with the clients’ customers.
Box 1
BPO subsectors
Contact centres provide both inbound and outbound voice services for sales, customer service,
technical support and other business processes.
Back office operations provide services related to finance, accounting (i.e. bookkeeping) and human
resource management (i.e. payroll processing).
2
In some countries, for example the Federative Republic of Brazil, business processes may be outsourced to
enterprises in the same country.
Decent Work Technical Support Team for East and South-East Asia & the Pacific 3
Software development services include all the processes required for the creation and management of
software, e.g. analysis, design, prototyping, programming and testing, customization, maintenance.
Animation services involve the design and provision of cinematographic drawings and models of
inanimate objects through 2D and 3D technology.
Data transcription services are used to interpret and transcribe oral dictation for such clients as health
professionals and legal offices.
Engineering development involves the engineering and design of such products as civil works,
buildings and components, and electronics.
Digital content services provide such digital products as music and information available on electronic
media.
Source: IBPAP in Bird and Ernst (2009).
Most BPO remains highly labour intensive, and countries with high educational
endowments and modern ICT infrastructure most surely benefit
Despite the increasing reliance on information technology (IT) for the delivery of services in the BPO
sector, most related activities remain labour intensive. This is the main reason outsourcing companies
rely on developing countries with both abundant supplies of low-cost labour and high technological and
educational endowments. Thus India and the Philippines, both with abundant supplies of educated
workers, present two of the most favoured BPO destinations. A global ranking of destination cities for
BPO services in terms of availability of competitive human capital, good business climate and ICT
infrastructure shows that the top-ten list is dominated by India, followed closely by the Philippines
(Tholons, 2014). In fact, Krakow, Poland, is the only city outside of Asia and the Pacific to appear in
the top ten. If countries rather than cities are considered, on the other hand, then top BPO destinations
include the Republic of Costa Rica, the Czech Republic, Ireland, Malaysia and the Socialist Republic
of Viet Nam.
India, the world’s largest BPO service provider, possesses both the educational and technological
endowments and the advantage of low labour costs (see Box 2). Studies have shown, however, that the
Philippines fares better than India in terms of the quality of its talent – a recent study found that 30 per
cent of Filipino graduates are employable, compared to only 10 per cent in India.
3
The Philippines’
comparative advantage in the BPO sector has been attributed to three main factors: English is spoken
with a neutral accent (which is typically untrue in India); the workers share cultural similarities with
Americans (because of the country’s colonial past); and Filipino workers bring a typical cordiality to
their work (Lee et al., 2014). Globally, the success of the BPO sector is closely tied to continued
investment in skills and modernization of telecommunications infrastructure.
BPO is an industry that has benefitted from low-cost locations with relatively highly endowed, skilled
workforces. Many BPO services involve repetitive tasks that are considered low skilled in much of the
developed world.
4
However, such services are often provided by high-skilled professionals in the
developing world, who are attracted to the sector by higher wages. Indeed, evidence suggests that
median hourly earnings in the ICT sector and ICT-related occupations (including BPO) is about 150 per
3
The Associated Chambers of Commerce & Industry (ASSOCHAM): “India’s losing 70 per cent incremental
voice & call centre business to Philippines: Study” (6 Apr. 2014). See
http://assocham.org/newsdetail.php?id=4455 [accessed 8 Dec. 2016].
4
This has been less true in recent years, as countries have moved up the value chain. For example, back office
services and knowledge process outsourcing (KPO) jobs tend to be high-skilled, both in developed and
developing economies.
Decent Work Technical Support Team for East and South-East Asia & the Pacific 4
cent higher than they are in urban non-ICT sectors. Furthermore, firms engaged in industries
characterized by greater Internet and software intensity faced higher wage increases across all skills
level compared to the rest of the economy (World Bank, 2016).
Research shows that the BPO sector is likely to continue growing in the near future, as firms will need
to achieve greater competitiveness by focusing on their core business, meanwhile outsourcing their non-
core activities to more competitive and specialized service providers (HfS Research, 2013). Aside from
the People’s Republic of China, India and the Philippines, countries that are likely to see further BPO
sector expansion include Brazil, the United Mexican States, the Republic of Poland, and Romania
(Deloitte, 2014). On average, the ICT sector in developing countries employs 1 per cent of their total
workforce, while in the Organisation for Economic Co-operation and Development (OECD) countries,
around 3–5 per cent of the workforce are engaged in the ICT sector (World Bank, 2016). As new
technological advances, notably cloud computing and automation, transform industries such as the BPO
sector, companies engaged in offshoring non-core businesses will increasingly recognize a country’s
ability to adapt to new technology and innovation, beyond any cost advantages stemming from low
wages (Deloitte, 2014).
Box 2
BPO sector in India
India is the top global sourcing destination for BPO, representing 55 per cent of the world’s market share – an
estimated market size of $146 billion in 2015, with export accounting for 67 per cent of total revenues.
5
Overall,
the industry accounts for 9.3 per cent of India’s GDP and employs 3.7 million workers (NASSCOM, 2016a).
The Indian BPO industry developed in the early 1990s, following liberalization policies that aimed to attract
foreign direct investment (FDI). India, with a large, low-cost pool of highly educated, English-speaking
workers, provided cost savings of about 40–50 per cent to companies that were able to offshore non-core
businesses (D’Cruz and Noronha, 2010). In the meantime, the Indian BPO sector has progressively upgraded
since the 1990s, creating new markets and industries (Fernandez-Stark et al., 2011).
IT services represent the biggest subsector within the industry, accounting for $68 billion in revenues in 2015,
while business process management (BPM) accounts for $26 billion, which closely matches the size of the
BPO sector in the Philippines. The difference in terminology BPM in India, as opposed to BPO in the
Philippines – is due to the fact that NASSCOM in India relabelled BPO as BPM to reflect the higher value
added services provided by the subsector. Indeed, the IT-BPM industry in India is highly diversified in terms
of services provided, and has increasingly prioritized skills over scale: in 2015, the industry registered 7 per
cent growth in employment, compared to 13 per cent growth in revenue (NASSCOM, 2016b).
Foreign direct investment: The main factor in BPO sector development
In some cases, countries have developed BPO capabilities through indigenous firms, but explosive
growth has typically come only with the inflow of foreign direct investments (FDI) as foreign firms
started looking for low-cost locations to outsource service delivery. The first wave of growth occurred
as MNEs started establishing subsidiaries. India provides a case in point, where local companies started
providing computer programming services in the 1980s, but the BPO sector only began to boom in the
1990s, when foreign firms began to establish operations in the country (Messenger and Ghosheh, 2010).
Indeed, FDI inflows to India were flat until the early 1990s, swelling in the late 1990s and continuing
on an increasing trend ever since, albeit with a decline in the aftermath of the financial and economic
5
The NASSCOM definition and scope of the IT-BPO industry in India is broader, including as it does IT
services, business process management, product development, software products, hardware and e-commerce.
Decent Work Technical Support Team for East and South-East Asia & the Pacific 5
crisis in 2008–09 (Figure 1). As a share of GDP, FDI inflow into India in 1992 was 0.1 per cent ($0.3
billion); this increased to 1 per cent in 200, and by 2008 it amounted to 3.5 per cent ($43.4 billion). It
declined after the crisis but has recently picked up again, at 2.1 per cent of GDP in 2015 ($44 billion).
Meanwhile, in the Philippines the trend in FDI has been more volatile, already peaking as a share of
GDP back in 1998, at 3.2 per cent ($2.3 billion). By 2008, it was 0.8 per cent of GDP, or $1.3 billion –
in the last few years, however, FDI inflow into the Philippines has followed an upward trend: in 2015,
it was 1.9 per cent of GDP, or $5.7 billion (still considerably smaller than that in India).
Figure 1. Foreign direct investments into India and the Philippines, 1985–2015
Source: World development indicators, 2016.
Additional factors: Innovations in technology, particularly cloud computing and
business process automation
Innovations in technology and communication systems have an enormous impact on the BPO sector,
creating demand for new skills and affecting employment outcomes. Two types of innovations have
been key for the BPO sector: i) cloud computing; and ii) business process automation. As these
innovations, in particular cloud computing, are broadly adopted, there are likely to be significant
consequences for the labour market. Indeed, cloud computing has the potential to transform fixed costs
into variable costs, rendering the provision of business services more flexible (see Box 3). Cloud
computing allows firms to pay for ICT services according to the extent of their usage. This “pay as you
go” model substantially reduces fixed costs for firms, since they no longer need to invest in expensive
hardware or software to run their daily operations.
0
0.5
1
1.5
2
2.5
3
3.5
4
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
% of GDP
US$ milliond
As a % of GDP Philippines As a % of GDP India
Net inflows (BOP, US$ millions) Philippines Net inflows (BOP, US$ millions) India
Decent Work Technical Support Team for East and South-East Asia & the Pacific 6
Box 3
Innovations in BPO industry: Cloud application services
Infrastructure as a service (IaaS) is a self-service model for accessing, monitoring and managing
remote infrastructure such as storage, networking and networking services (e.g. firewalls). Instead of
having to purchase hardware, users can subscribe, paying for only as much of the service as they
consume.
Software as a service (SaaS) is a software distribution model in which applications are managed by
a third-party vendor and typically made available to clients over the Internet.
Platform as a service (PaaS) provides operating systems and associated services over the Internet
without any download or installation. PaaS is sometimes called “cloudware” because it moves
resources from privately owned computers into the Internet “cloud”. PaaS can be considered an
outgrowth of software as a service (SaaS).
A recent survey of large firms showed that more than two thirds of firms anticipate that future
outsourcing decisions will be influenced by cloud computing (Figure 2). Other innovations likely to be
important going forward include big data, business process as a service, and hosted virtual desktop.
Indeed, as investments in technology infrastructure and economies of scale become less relevant, these
innovations can level the playing field between big businesses and small and medium-sized enterprises
(SMEs), thereby fostering local development and job creation. Cloud computing could have positive
implications in terms of employment, since this technology enables employees to work from any
location as long as they have access to a reliable Internet connection and the necessary cloud platform.
This in turn enables crowdsourcing, where individuals can provide services to clients looking for
specific tasks to be completed. Moreover, the increasing flexibility of BPO service provision can have
a positive impact on the following vulnerable groups: women, who tend to be constrained by cultural
norms and family obligations; people with disabilities; and individuals who live far from large urban
centres. For example, the Kudum-bashree project in India has allowed companies to outsource IT
services to women-run cooperatives in rural areas, with almost 80 per cent of these women earning at
least one dollar a day (World Bank, 2016). In addition, the fixed-cost savings to BPO firms that derive
from not relying on set locations with the concomitant rent, electricity and transportation costs could
be directed instead to higher wages for employees, assuming international labour standards are
followed.
Decent Work Technical Support Team for East and South-East Asia & the Pacific 7
Figure 2. Anticipated influences on future outsourcing decisions cited by firms, 2014 (% of respondents
more likely to outsource as a result of following developments)
Note: The Deloitte Consulting Global Outsourcing Survey 2014 included 157 unique respondents representing 140
public and private sector entities.
Source: Deloitte, 2014.
Automation is another technological innovation affecting the BPO sector. This process involves using
computer programmes to perform repetitive tasks, where the chances of unforeseen errors are lesser
than they would be if humans were doing them. Labour cost advantages can provide firms, where they
offshore their non-core operations to developing countries, with total cost savings of 15 to 30 per cent.
Automation, for its part, is expected to reduce costs by as much as 40 to 75 per cent (KPMG, 2016).
Automation could take the lead in BPO services such as IT support, workflow processes and other types
of back-office operations characterized by high volumes of data and transactions, where queries and
actions are predictable, regular and suitable to automation. The need to cut costs is leading even contact
centres in developing countries to resort to automation for the provision of basic and frequently
demanded services. In South Africa, for example, a local health-care company is already using IBM’s
artificial intelligence system for its customer care operations (World Bank, 2016).
More complex tasks, however, where basic robotic process automation remains insufficient, are still
likely to require human workers. Moreover, as basic services get automated, technological updates
increase the skill intensity of BPO activities conducted by workers. This transition to higher value added
BPO activities is referred as “knowledge process outsourcing”, or KPO. (Fernandez-Stark et al., 2011).
In this context, developing countries, if they want to remain attractive BPO destinations, need to foster
skills upgrading by investing in human capital. At the same time, more focus is needed on issues of
non-inclusive development, as business process automation and KPO are likely to preferentially employ
and otherwise benefit groups of skilled and highly educated workers.
Innovations in the BPO sector can create challenges for the world of work
Indeed, the flexibilization of employment through innovations such as cloud computing could also bring
challenges in terms of decent work stemming from higher volatility in employment and lower access to
social protection, since employees are hired per project rather than on a fixed-term basis. Further
69%
66%
59%
55%
53%
41%
35%
28%
13%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Cloud computing
Business process as a service
Hosted virtual desktop
Big data
Enterprise mobility
Open innovation
Crowdsourcing
Bring your own device (BYOD)
Gamification
Decent Work Technical Support Team for East and South-East Asia & the Pacific 8
expansion of this “on-demand economy” might require a rethinking of the social protection schemes in
place, perhaps by delinking social insurance from employment through independent social assistance
(World Bank, 2016). Additionally, as a substantial degree of self-management and specialized technical
skills are needed for these flexible, ICT-enabled forms of employment, advances in cloud computing
could perpetuate the creation of elite forms of employment in BPO, benefiting a few highly skilled
individuals while reducing the need for lower-skilled workers. Furthermore, as the pressure for near-
shoring increases – where companies relocate their non-core business services close to home – countries
with low labour costs could see a decline in jobs created by offshoring. The prevalence of offshoring
would depend on the readiness of developing countries to adopt new technological developments, while
still offering cost-competitive prices.
The Philippines scores relatively well in terms of cloud readiness, positioning itself as the tenth top
destination in the world.
6
The expanding BPO industry provides substantial opportunities for
implementation of cloud technology in that country. Moreover, the Philippines was found to score
relatively well in terms of freedom of information as compared to most of its Asian neighbours – this
also facilitates deployment of cloud technology. However, to enable broad implementation of cloud
technologies, improvements are needed in government regulations, data privacy and telecommunication
infrastructure. Moreover, challenges remain for the expansion of BPO activities in rural areas, where
access to quality ICT networks and infrastructure remains limited. Since 2009, IBPAP has supported
the identification of top and emerging locations in the Philippines to set up BPO operations through its
“next wave city” (NWC) project, which aims at bringing economic development to more sites across
the country, as well as enabling efficient operations for BPO companies.
Meanwhile, cloud technology could affect some BPO subsectors more than others. For example, it is
likely to have a strong impact on flexibilization of employment relations in the software development
sector, which demands a relatively high level of skills and autonomy. On the other hand, customer
service operations carried out in contact centres may favour the use of the traditional business model,
as it is easier to assess the performance and motivate employees gathered in a single location. However,
contact centres are still likely to benefit from cloud technologies through the “pay as you go” system.
Indeed, despite the fact that contact centre activities tend to be office-based, innovations in the
traditional business model are emerging – for example, business start-ups in the Philippines that provide
on-demand contact centre services through experienced home-based contact centre agents working at
hourly rates.
3. BPO in the Philippines
In line with the increasing importance of the service sector in the Philippines, the BPO
sector has tripled in the last 10 years
In the last 15 years, the Philippine service sector has grown by over 10 per cent in terms of value added,
while both agriculture and manufacturing sectors have declined by 22 and 10 per cent respectively
(Figure 3). This growth in services has paralleled growth in the Philippine BPO industry. Indeed, the
BPO sector has tripled its global market share from 4 per cent in 2004 to 12.3 per cent in 2014; by 2020,
it is expected to further increase its share to 19 per cent (OBG, 2015). Moreover, the Philippine BPO
6
See http://www.rappler.com/business/industries/215-tech-biz/83186-ph-climbs-cloud-readiness-index
[accessed 8 Dec. 2016].
Decent Work Technical Support Team for East and South-East Asia & the Pacific 9
industry outperformed the world’s BPO industry performance, posting an average growth of around 9–
12 per cent between 2004 and 2014, while globally the BPO industry registered growth of around 5–7
per cent during the same period. In 2014, total revenue in the Philippine BPO industry was $18.4 billion
– 6 per cent of GDP – employing 1.03 million people. The road map for 2011–2016 prepared by IBPAP
and the Philippines’ Department of Science and Technology (DOST) forecasts that by 2016 the BPO
industry will reach a target of $25 billion in revenues (7.3 per cent of GDP) – matching the economic
contribution of foreign remittances and employ 1.3 million people. The sector is also expected to
support 3.2 million indirect jobs by 2016, including employees in the ICT sector and research facilities.
7
Figure 3. Value added by sector in the Philippines, % of GDP (2001=100)
Source: Authors’ calculations based on the World Development Indicators, 2016.
Contributing to this growth: Low labour costs, highly skilled workforce with neutral
accent in English, and ICT infrastructure
Surpassing India in 2011, the Philippines has established itself as a top destination for BPO services, in
particular for contact centre business. This may be attributed to low labour costs coupled with a good
endowment in human capital – more than a quarter of the population holds a tertiary degree, and more
than half a million more graduate from college each year, most with both an excellent command of the
English language and a cultural affinity with the United States. Consequently the Philippines has also
managed to develop a competitive advantage in voice-based BPO services (Del Prado, 2015; Lee et al.,
2014). Furthermore, since the deregulation of the telecommunications industry in 1993, the Philippines
has developed globally competitive ICT infrastructure, with two fibre-optic networks covering most
regions of the country. The low cost and high quality of available real estate is also an advantage – 80
per cent of grade “A” office space in central Manila is currently occupied by companies (Lee et al.,
2014).
7
See http://www.IBPAP.org/investors/benefits-of-doing-business-in-the-philippines [accessed 7 Dec. 2016].
70
75
80
85
90
95
100
105
110
115
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agriculture Industry Services
Decent Work Technical Support Team for East and South-East Asia & the Pacific 10
Meanwhile, the Government has been active in attracting BPO investment through tax incentives
favoured by the Philippine Economic Zone Authority (PEZA). PEZA incentives include the following:
a special 5 per cent tax on gross income earned; exemption from payment of import duties and taxes on
imported machinery, equipment and raw materials; a deduction equivalent to 50 per cent of training
expenses; and permanent resident status for foreign investors who make an initial investment of
$150,000 or more. Industry associations have also played an important role in promoting BPO-related
investment in the country, establishing networks and global linkages, as well as encouraging the
Government to create a business-enabling environment (Lee et al., 2014; Del Prado, 2015).
Contact centres: Most important revenue source in the Philippine BPO sector
Tracing the growth in the BPO industry in the Philippines can provide a broader context. The industry
has undergone three phases: i) in the late 1990s, when the first BPO operations were established, most
of them contact centres; ii) during the early 2000s there was a transition towards higher value added
activities such as transcription services and back-office operations in accounting and finance; and iii)
in the late 2000s the BPO sector further developed into high value added subsectors, in particular
medical transcription services (Fernandez-Stark et al., 2011). In 2010, in the light of this transformation,
the Philippines was presented with the Offshoring Destination of the Year award by the UK’s National
Outsourcing Association.
Despite this transition into higher value added activities, however, the Philippine BPO industry remains
heavily reliant on contact centres. As of 2013, contact centres accounted for 55 per cent of the total
revenue in the BPO sector ($8.4 billion), up from 45 per cent ($2.8 billion) in 2008 (Table 1 and Figure
4). Even though other subsectors – particularly transcription and software development – have seen
increasing growth, they account for a much smaller fraction of the total sector revenue.
Table 1. Size of BPO subsectors, in terms of sales revenue (US$ million)
Meanwhile, the Philippine BPO sector remains heavily reliant on foreign equity, with a foreign-to-total-
capital ratio of 93.4 in 2013 and an average of 86.6 between 2005 and 2013. Contact centres attract the
highest share of FDI – $3.8 billion in 2013, representing 48.1 per cent of the total $7.8 billion in BPO
sector FDI. Historically, the United States has been the biggest foreign investor in the BPO sector. Since
2010, however, Europe – especially the United Kingdom – has surpassed the United States in terms of
foreign equity inflows in that sector. (In 2013, 48.7 per cent of total FDI was from Europe, while 31.4
per cent was from the United States.)
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Contact centre 587.2 985.6 1455.4 2050.5 2838.7 4206.8 5260.0 6817.3 7587.2 8393.8
Transcription 4.2 8.5 20.3 32.6 34.0 56.6 84.2 121.5 198.4 422.6
Animation 12.4 17.0 26.0 28.9 36.3 52.3 63.2 72.0 80.4 88.0
Software development 278.8 399.2 706.9 1098.3 1412.5 1672.3 2197.9 2469.1 2848.4 3429.2
Other BPOs 441.0 585.4 697.0 1157.3 2004.0 2269.9 2452.4 2594.4 2736.0 2971.4
TOTAL INDUSTRY 1323.5 1995.7 2905.7 4367.6 6325.4 8258.0 10057.7 12074.3 13450.4 15305.0
Source: Bangko Sentral Ng Pilipinas.
Sales revenue, levels (in US$ million)
Decent Work Technical Support Team for East and South-East Asia & the Pacific 11
Figure 4. Size of the BPO subsectors in the Philippines (in terms of sales revenue), 2005–13
Note: the bars refer to sales revenue for each BPO subsector out of total sales revenue in the BPO sector in the Philippines.
Source: Authors’ calculations based on Bangko Sentral Ng Pilipinas.
Contact centres remain biggest employers, but employment growth in higher value
added subsectors more pronounced in recent years
Contact centres both generate the most revenue in the BPO sector and serve as the largest employers in
the Philippine BPO industry. In 2013, the contact centres accounted for 530,882 jobs, more than 60 per
cent of jobs in the sector (Table 2). None of the other subsectors can boast similar levels of employment.
Software development, a growing subsector, accounted for 10 per cent of all the jobs (82,583) in 2013.
Similarly, transcription accounted for 2.4 per cent of employment, animation even a smaller share.
Lastly, other BPOs, a category with a mix of different types of activities, accounted for 213,939 jobs in
2013 (25.1 per cent of all jobs in the BPO industry).
Table 2. Total jobs in the BPO subsectors in the Philippines
Meanwhile, in terms of jobs growth in different subsectors, transcription services has led the way with
a 20-fold increase from fewer than 1,000 jobs in 2004 to more than 20,000 in 2013 (Figure 5).
Similarly, other BPOs (an eclectic mix of back office operations), which are higher value added than
contact centres, have also seen a significant increase in employment – a greater than 13-fold increase
in total employment, from 15,118 jobs in 2004 to 213,782 in 2013. Other high value added subsectors
have seen more jobs. Animation, for example, has seen a three-fold rise in jobs since the early 2000s.
Although software development has grown slightly in recent years, this subsector mostly holds promise
for job creation in the future, still accounting for a very small fraction of total jobs created in the BPO
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Other BPOs
Software development
Animation
Transcription
Contact centre
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Contact centre 65,006 96,246 153,683 169,748 212,372 255,765 329,597 433,183 487,757 530,882
Transcription 901 1,785 4,956 6,621 4,321 7,060 9,131 11,084 16,997 20,172
Animation 1,488 1,864 4,482 4,323 5,656 3,732 3,908 3,973 4,164 4,206
Software development 11,975 17,829 42,657 44,870 49,893 46,987 49,516 55,464 64,922 82,583
Other BPOs 15,118 20,278 42,267 45,994 82,893 131,267 143,975 175,761 196,092 213,939
TOTAL INDUSTRY 94,488 138,002 248,045 271,556 355,135 444,811 536,128 679,464 769,932 851,782
Source: Bangko Se ntral Ng Pil ipinas.
Decent Work Technical Support Team for East and South-East Asia & the Pacific 12
sector. Moreover, estimates suggest that, since 85 per cent of current jobs in the Philippine BPO sector
are in routine tasks (both cognitive and manual), these are vulnerable to automation in the near future
(World Bank, 2016). To avoid massive job losses, the country needs to continue moving towards higher
value added – i.e. non-routine and cognitively demanding – tasks.
Figure 5. Employment growth in the BPO sector, 2004–13 (2004=100)
Source: Authors’ calculations based on the Bangko Sentral Ng Pilipinas.
Higher wages in the BPO sector: The biggest draw for young graduates in the
Philippines
Compensation per employee in the Philippine BPO sector is substantially higher than the average wage
in the rest of the economy (Figure 6). In 2013, annual average compensation per employee was $9,297
per year in the BPO sector, while the average daily wage in the rest of the economy was $2,580 per year
(ILO, 2014). The highest paying subsector was software development, where the average annual
compensation per employee was $18,453 – this represented a growth of 11.5 per cent between 2009
and 2013. The transcription services category is the lowest paid in the industry, where the average
annual wage was $6,198 in 2013, although that figure remained well above the average income in the
Philippines. Indeed, as it is evident from Figure 6, average wages in the BPO sector are 3.6 times those
in the rest of the Philippines, which declined from 2009, owing mostly to increased wages in the rest of
the economy, since it has been growing much faster than the BPO sector (albeit starting from low
levels). In terms of the wage premium in the BPO sector, software development is the most attractive –
over seven times the average annual wage in the rest of the economy – underscoring the need to move
towards higher value added activities in the BPO industry.
Contact Center
Transcription
Animation
Software Development
Other BPOs
50
300
550
800
1,050
1,300
1,550
1,800
2,050
2,300
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Decent Work Technical Support Team for East and South-East Asia & the Pacific 13
Figure 6. Wage premium: Ratio of average annual wage in the BPO subsectors to average annual
wage in the Philippines, 2009–13
Source: Authors’ calculations based on the Bangko Sentral Ng Pilipinas and Global Wage Report, 2014/15.
BPOs have a large economic impact in the Philippines but lack linkages to other
sectors
The BPO sector in the Philippines has clearly emerged as one of the most important industries in the
country, quickly closing in on the economic contributions from migration and inflow of foreign
remittances. Indeed, Philippine workers have long been leaving their country in search of better
economic opportunities abroad – currently these workers are contributing $25 billion to the economy.
But as the BPO sector continues to expand, it is likely to surpass remittances as a source of national
income – indeed, within the next two years the total revenue generated by the sector is likely to amount
to $30 billion.
In terms of the sector’s impact on the rest of the economy, a study commissioned by the Asian
Development Bank (ADB) found that the Philippine BPO industry had only limited inter-sectoral
linkages. In particular, out of the 240 sectors studied in the Philippines, the BPO sector ranked 138th in
terms of forward linkages, and provided services mainly to the following businesses: tour and travel
agencies; wholesale and retail trade; and banking. Similarly, the BPO sector ranked 178th in terms of
backward linkages, requiring output from banking, electricity and communication services for its
operations (Magtibay-Ramos et al., 2007). As the BPO industry grows, however, increasing
employment and compensation should have a positive impact on domestic demand and consumption.
According to research conducted by the Oxford Business Group (OBG), BPO workers tend to spend all
of their earnings onshore, and each new job in the BPO industry therefore generates 2.5 additional jobs
in retail, public transportation and other support services (OBG, 2015).
3.0
3.4
4.0
4.7 4.7
7.3
2.4
2.9 3.1 3.3 3.6
7.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Transcription Animation Other BPOs Contact centre TOTAL INDUSTRY Software
development
2009 2013
Decent Work Technical Support Team for East and South-East Asia & the Pacific 14
4. Challenges for decent work in the BPO
sector
This section presents the main value added of the paper, employing as it does structured interviews
across all the major BPO subsectors, and identifying industry challenges in terms of decent work
creation (
Figure 7). These interviews targeted IBPAP representatives, general managers, human resource (HR)
executives and BPO employees. Taking into account the most recent estimates of BPO employee
numbers, total employment generated by the companies interviewed for this study represented roughly
7 per cent of the total BPO industry workforce. Those companies interviewed operated in both the voice
and non-voice BPO categories; the latter included IT, medical transcription, financial accounting and
HR services. Employment figures at each of these companies ranged from around 500 to more than
40,000 workers (
Figure 7). Areas of investigation included the following: skills development, worker well-being, gender
disparities and workers’ voice and representation. This section also proposes key public and private
interventions to address decent work challenges.
Figure 7. Profile of companies that responded to the ILO (number of employees covered)
4.1 Skills shortage
Expanding BPO sector in the Philippines threatens concomitant skills shortage
The Philippine BPO sector employs mainly college graduates, since the minimum requirements for
positions usually includes at least two years of college education with excellent command of spoken
and written English. According to a study by Bird and Ernst (2009), 80 to 90 per cent of employees in
500
15,000
30,000
42,000
- 10,000 20,000 30,000 40,000 50,000
Global in-house centre for customer support
IT services and back-office
Medical transcription, back-office operations,
including finance and HR
Contact centres, including technical support
Decent Work Technical Support Team for East and South-East Asia & the Pacific 15
the BPO companies tend to be college graduates. While the contact centres subsector tends to accept
any type of educational background from the graduates, the software development subsector requires
more specialized technical skills acquired through degrees in IT-related subjects. Furthermore, BPO
companies specialized in higher value added non-voice service activities recruit employees who usually
have specialized international certifications: e.g., financial analysts have CFA (Certified Financial
Accountant) certifications, while employees engaged in medical transcription are usually specialized
nurses. Not surprisingly, employees at the BPO firms tend to be relatively young, with an average age
of 23–28 years and with limited or no previous work experience (Bird and Ernst, 2009). Indeed, the
BPO sector has created better quality employment opportunities for college graduates with no previous
work experience – a large majority of these workers previously relied on six-month contractual jobs in
wholesale and retail sales, earning close to minimum wage in their first post-degree employment
(Amante, 2010).
Given the relative attractiveness of BPO jobs as a first employment for young graduates, firms in the
sector report difficulties hiring candidates to fill vacancies. Minimum entry requirements usually
include a strong command of the English language, computer literacy and a customer-oriented mind
set. These qualifications are proving increasingly difficult to find, considering the recent expansion of
the industry. Reportedly, only 3 per cent of applicants that apply for BPO jobs are adequately skilled
(Keitel and Ledesma, 2013). With contact centres, for example, which should have an easier time filling
positions, IBPAP estimates that in fact only 10 per cent of applicants qualify for contact centre positions.
The skills gap in the BPO sector is likely to become more severe as the industry expands – experts
estimate that for the sector to grow at the targeted rate of 15 per cent per year 150,000 new entrants are
needed each year, not taking attrition into account. This would require 60 per cent of all new graduates
to enter the BPO sector, which, given the recent take-up rate, is unrealistic. As the sector expands, there
will likely be too few college graduates to meet demand. This is a particularly pressing problem,
considering that the Philippine BPO sector aims to transition to higher value added activities.
8
High turnover of BPO workers putting further strain on employers’ ability to train
workers for higher value added activities
Aside from skilled labour shortages, the BPO sector tends to suffer relatively high turnover rates, which
translate into higher recruitment and initial training costs for employers. According to IBPAP, average
yearly industry turnover for its members was 38 per cent in 2009; that figure decreased to 19 per cent
in 2015, but remained high compared to industry standards. Moreover, empirical evidence shows that
the turnover rate can vary significantly according to the companies surveyed and across years. For
example, enterprises surveyed by Bird and Ernst (2009) showed that the annual turnover rate ranged
between 19 and 47 per cent. On the other hand, research conducted by Amante (2010) suggested a
turnover rate of 20–30 per cent. One of the companies interviewed for this paper reported a monthly
turnover as high as 50 per cent for employees in leadership positions, and 75 per cent for analyst
positions.
Amante (2010) shows that the main factors behind high BPO industry turnover include the following:
i) lack of competitive compensation (22.2 per cent of respondents); ii) lack of professional growth (21.6
8
The animation subsector illustrates the challenges facing the industry: there is a limited pool of talent in the
country that can do the job, since more skilled workers tend to emigrate looking for better opportunities abroad,
leaving the Philippine industry with the production of 2D animation, rather than the fast-growing and more
lucrative 3D animation services (Tschang, 2011).
Decent Work Technical Support Team for East and South-East Asia & the Pacific 16
per cent); and iii) stress in the workplace (17 per cent). Furthermore, the practice of “call centre
hopping” is common and, considering the limited supply of skilled and experienced professionals,
employees that change jobs are likely to obtain higher compensation with a new employer. Additionally,
career development in the Philippine BPO sector can be limited, especially in contact centres. For
example, Bird and Ernst (2009) found that senior managers in contact centres represent 0.5 to 2 per cent
of the total workforce, compared to the 80 to 90 per cent of workers who are agents handling inbound
and outbound calls – monotonous jobs that involve low skills, for which college graduates are often
overqualified. The situation is better in the software development subsector, where managers constitute
of 5 to 26 per cent of the total workforce. In both these subsectors, promotion to managerial positions
does happen internally, but the average worker’s chances for advancement are slim.
Initiatives to tackle the problem of skills shortages and high turnover include the following:
Public-private partnership (PPP) between IBPAP and the Technical Education and Skills
Development Authority (TESDA). This PPP was established to address the skills gap
challenge. The 2011 memorandum of agreement (MoU) between IBPAP and TESDA resulted
in the creation of the Industry Training for Work Scholarship Program (I-TWSP), aimed at
providing training to “near hire” applicants who stand just below the threshold requirements to
fill positions in the BPO sector.
9
Different BPO categories require different types of training,
so that subjects taught, funding and hours vary according to the specific BPO subsector. For
example, the I-TWSP allocates 100 hours of training to each selected applicant in contact
centres, whereas 500 hours of training are allocated to each new hire in the more skills-intensive
software development subsector. As I-TWSP beneficiaries include high-school graduates, this
scheme has the potential to diminish labour shortages in the BPO industry while promoting
inclusive growth. As the interviewees for this study revealed, the I-TWSP has supported moves
on the part of participating companies to increase their return on investment through access to
subsidized training.
Aiming to reduce recruitment costs and promoting a steadier supply of BPO employees,
IBPAP has designed a national competency test. The test addresses basic skills in demand in
the BPO sector, namely proficiency in English and computer literacy. IBPAP has share
information on scores with educational institutions in the country to ensure that the existing
curriculum is in line with global industry requirements. As part of its skills development effort,
IBPAP also partnered with educational institutes in its ADEPT programme, which aims to
improve language skills among university students. Private sector efforts have supported the
development of the medical transcription programme, for example the MTC Academy, the
largest medical certification institution in the Philippines. MTC has partnered with the
American Association for Medical Transcription to ensure that the certification system matches
the curriculum requirements of BPO enterprises operating in the subsector. The Government
has also supported subsector growth by offering scholarships for specialized training of health
professionals (Fernandez-Stark et al., 2011).
The Philippine 2011–2016 Development Plan targeted the BPO industry as a priority
sector. As part of this, the Government has introduced reforms to the education system to
address labour shortages and facilitate the transition to higher value added services. For this
purpose, a service management program has been included in college curriculum in partnership
between IBPAP and the Commission on Higher Education (CHED). This initiative establishes
9
The programme is still in place, but is now managed solely by TESDA.
Decent Work Technical Support Team for East and South-East Asia & the Pacific 17
synergies with the 2011 reform of Philippine’s education system, which extended the pre-
university cycle from 10 to 12 years. The service management programme provides final-year
college students the opportunity to take elective courses as their minor degree specialization,
enabling students to acquire a basic knowledge of the BPO industry, or more advanced skills
tied to the sector, by following the Lean Six Sigma Certification Programme.
10
Strengthening Knowledge-Based Economic and Social Development. This ADB technical
assistance programme supports IBAP and the University of the Philippines in the promotion of
inclusive skills development in the BPO industry through the creation of e-SPM, an online
platform that makes the service management programme taught in universities available online
free of charge. This programme is expected to target 3,000 students (50 per cent of them
women) and involve 900 teachers (50 per cent women).
11
IBPAP observed that migrant Filipino
workers around the world – for example in Europe, Hong Kong (China) and the Kingdom of
Saudi Arabia – are following these online courses from abroad. This may eventually support
the return of the Philippine diaspora to their home country, equipped with skills adequate to
finding quality employment in the BPO industry.
Private initiatives by big firms to match efforts by Government and universities. While
smaller companies tend to rely on industry-level initiatives promoted by IBPAP, two of the
largest MNEs operating in the non-voice subsector cooperate with universities in establishing
curricula in line with industry requirements. These include skills development in customer
service, communication, analytics and social media management. An MNE interviewed for this
paper had been active in cooperating with Philippine universities to address these areas of skills
development. Another resource the sector needs is people with advanced technological skills,
including cloud-based analytics to handle “big data”. Meanwhile, some companies also provide
graduating students with access to on-line training materials. As part of their talent attraction
strategies, large BPO enterprises normally engage in career orientation seminars as well as
recruitment events in university campuses across the country. One of the largest BPO
companies in the Philippines also promotes social impact training initiatives, among these
helping disadvantaged youth gain the job skills needed in the BPO industry and providing
training and certification for rural BPO workers.
Increasingly common on-the-job training and other in-house efforts. Internal skills-
development strategies may involve in-house training that can last from a few weeks to six
months, depending on the level of technical skills required for a certain position. In addition,
continuous training best practices exist among the largest players in the BPO sector. These
range from career development seminars to on-line training materials, personal financial
management courses and advanced training such as through the Lean Six Sigma certification.
One of the companies interviewed encourages the creation of various “employee resource
groups”, which gather workers with similar interests and lifestyles to provide personal and
professional development through mentoring and community involvement. These initiatives
10
Universities have also been supported by the private sector in developing middle-management skills through
pre-MBA programmes and e-learning tools, and have attracted additional support from Harvard Business
Publishing (Fernandez-Stark et al., 2011).
11
Interview with IBPAP. For more information see: http://fics.upou.edu.ph/index.php/projects/88-
strengthening-knowledge-based-economic-and-social-development [accessed 8 Dec. 2016].
Decent Work Technical Support Team for East and South-East Asia & the Pacific 18
can support career advancement in leadership roles internally, while increasing employee
satisfaction and reducing attrition.
4.2 BPO sector employee health and well-being
Employees report high-stress work environments with detrimental impacts on health
Working conditions in the BPO sector are regulated by the Philippine Labor Code, which addresses
hours of work, pay and benefits, social security, industrial relations, collective bargaining and
occupational safety and health (OSH) issues. As this paper has indicated, wages in the BPO sector tend
to be higher than in the rest of the economy, and this is a major pull factor for young graduates. However,
wages are only one of the many aspects of decent work. A study by Amante (2010), for example, found
high levels of stress were common in the BPO sector, particularly in contact centres. On average, agents
in contact centres each took 78 calls per day, but they might have to deal with more than 100 calls per
day. Agents had to respond to at least 91 per cent of these calls within 22 seconds, and then were given
5–6 minutes to address clients’ requests. Employees often suffered from health problems such as
headache, fatigue, eye strain, chest and back pain and voice problems. Meanwhile, since most
Philippine BPO operations served American and European clients, employees had to work night shifts
(considering time zone differentials). Night work can cause disruptions in employees’ work-life balance
and affect their psychological well-being. Harassment from irate clients was the prime cause of stress
among the surveyed BPO employees, and the main factor in their decision to leave.
High incidence of HIV/AIDS among BPO workers
Meanwhile, workers in the BPO sector experienced a higher incidence of HIV/AIDS than did other
sectors in the Philippines. For example, a 2010 study entitled “Lifestyle and Reproductive Health Issues
of Young Professionals in Metro Manila and Metro Cebu”, conducted by the University of the
Philippines Population Institute (UPPI), shows that Philippine workers in contact centres, compared to
workers in other sectors, faced a higher probability of exposure to HIV/AIDS; the stress they
experienced in the workplace, among other factors, could encourage risky sexual behaviour. This study
claimed a 150 per cent higher rate of engagement in risky sexual behaviour among male contact centre
workers, compared to their non-contact centre counterparts, and a 450 per cent higher rate of
engagement in risky sexual behaviour among female contact centre workers, as compared to their non-
contact centre counterparts (Salvana, 2012).
Meanwhile, an ILO-funded study by the Department of Psychology, Ateneo de Manila University,
corroborated the prevalence of risky behaviours among contact centre workers, including early sexual
activity, infrequent condom use and promiscuity (Melgar et al., 2009). Another study identified
employment in contact centres as a significant risk factor for testing positive for HIV – 12 per cent of
the total sample tested positive for HIV and, while one-third of those tested indicated that they worked
in the contact centre industry, one-half of those who tested positive reported being contact centre agents
(Gangcuangco et al., 2010). Aside from high levels of workplace stress, other factors might partially
explain these findings, for example causes related to BPO workers’ higher-than-average incomes and
demographic profiles.
Efforts have been made to enhance general well-being and health among BPO sector employees:
Decent Work Technical Support Team for East and South-East Asia & the Pacific 19
Initiatives to promote compliance with OSH and general labour standards. In 2014, the
Department of Labor and Employment of the Philippines (DOLE) and IBPAP signed a
memorandum of agreement (MOA) to foster voluntary compliance with OSH and general
labour standards set and monitored by DOLE. Efforts include provision of training materials
and promotion of increased awareness on welfare issues in the BPO sector, while fostering
voluntary adoption of labour code standards. Under this programme, BPO companies can
voluntarily sign up for labour inspections. In cases of non-compliance, DOLE provides audited
companies with flexible support in complying with labour standards. These standards include
provisions that address issues related to unhealthy lifestyle among BPO workers, the presence
of on-site medical facilities, mandatory breaks for breastfeeding women, and free transport for
workers doing night shifts. Since the launch of this programme, DOLE has conducted labour
inspections that found 39 per cent of the firms undergoing these voluntary audits comply with
the standards.
12
One interviewee stated that MNEs operating in the Philippine BPO sector are
in most cases compliant to national regulation and, given the need to attract and retain talent,
they often adopt standards that go beyond it.
Efforts to improve employee health and wellness. In order to share best practices related to
mental and physical health of employees (especially related to stress in the workplace), IBPAP
explained that BPO companies had been partnering with health management organizations
(HMOs) to improve their wellness programmes; this was in line with the practices reported by
the interviewed companies. Meanwhile, some of the firms provided on-site fitness centres to
their employees to encourage physical activity and improved overall health. Well-being
programmes also included classes targeting good health and wellness practices (i.e. stretching
exercises), free massages, first-aid training sessions, Zumba and yoga classes, personal
counselling sessions. Employees could suggest other fitness activities to the HR managers.
Other firm initiatives included recreational activities such as retreats, running events, summer
outings, photo shooting events and birthday celebrations, all with the aim of reducing stress in
the workplace, improving relationships among employees and reducing attrition rates.
Government efforts to reduce the incidence of HIV/AIDS among BPO workers. In 2015,
the Department of Health reported that the incidence of HIV/AIDS was on the rise among call
centre workers. A congressional inquiry was pushed to strengthen the Philippine
Comprehensive Policy on HIV/AIDS prevention through the implementation of an effective
National HIV/AIDS plan. With government-led initiatives and in close partnership with
participating firms, HIV/AIDS awareness seminars are held on a yearly basis (these seminars
are promoted by the provincial governments).
Box 4
Labour issues in the Indian BPO industry: Similarities to the Philippine experience
Continued demand for skills and public-private initiatives. As in the Philippines, India’s IT-BMP
industry relies on young (25 years on average), highly educated segments of the population, with at least a
college degree if not a postgraduate education (Ramesh, 2004; D’Cruz and Noronha, 2010). To ensure
continuing availability of qualified personnel, NASSCOM has partnered with universities to strengthen
professional education in line with industry requirements. This has been complemented by in-house training
efforts by BPO companies (Fernandez-Stark et al., 2011).
12
Interview with IBPAP.
Decent Work Technical Support Team for East and South-East Asia & the Pacific 20
High attrition rates and efforts at retaining staff. Attrition rates are also high in the Indian IT-BMP
industry, with NASSCOM (2016b) estimating an average attrition of 30–40 per cent for BPM services and
15–18 per cent for IT services. Therefore, as in the Philippines, employee retention is a serious issue in the
Indian BPO sector, especially in contact centres but also for back-office operations. The high turnover has
been mostly attributed to the strong result orientation, continuous monitoring and night-shift work
characteristic of BPO jobs, with the concomitant work-related stress and work-life imbalances. Employee
decisions to leave are often accompanied by a desire to find more rewarding career opportunities that better
match their level of education (Ramesh, 2004; Noronha and D’Cruz 2006; D’Cruz and Noronha, 2010).
Various initiatives have been promoted to increase employee motivation to stay, including highly attractive
compensation packages (considering that BPO salaries are already higher than those in other sectors) and
the use of the “early warning system” in human resources management to identify individuals likely to
leave and then prioritize immediate intervention (NASSCOM, 2016c).
Women’s participation in the BPO sector. In India, the IT-BMP industry serves as an important employer
of women, and it has been championed for its gender inclusivity. In 2015, NASSCOM estimates, the
industry directly employed more than 1.2 million women. In rural India, an awareness programme regarding
opportunities in the BPO industry successfully increased both enrolment in relevant training programmes
and elementary school enrolment among young girls (World Bank, 2016). However, women represent
around 35 per cent of the total sector employees, a figure not as high as that in the Philippines. This may
reflect stronger cultural barriers against women employment in the industry, associated with work-life
imbalance and difficulties in meeting family obligations.
Workers’ voice and representation in the industry is limited. NASSCOM, as the leading industry
association, promotes the view that unionization in the sector is irrelevant because salaries and working
conditions are substantially better than the national average. Any union activity is perceived negatively on
the grounds it could hamper sectoral growth and development (D’Cruz and Noronha, 2010). On their side,
Indian BPO employees have been reluctant to join unions because of their higher professional status
compared to blue-collar workers (Sandhu, 2006). Other factors have included high labour mobility among
BPO employees, a general aversion to conflict, fear of employer backlash, and managerial policies centred
on individualism (Noronha and D’Cruz, 2006; Ramesh, 2004; Taylor et al., 2008 in D’Cruz and Noronha,
2010). Alternative arrangements, similar to those in the Philippines, have been offered in some cases to
provide space for people to voice their grievances (Sandhu, 2006; James and Vira, 2009; Pratap, 2010).
4.3 Women in the BPO sector
More than 50 per cent of workers are women, but they tend to be concentrated in
low paid, low-skilled work
According to the most recent estimates from the Philippines Statistics Authority (PSA), more than 55
per cent of workers in the BPO sector are women. Women were present in medical transcription
industries (74.5 per cent), data processing (65.2 per cent) and call centre activities (58.8 per cent).
Furthermore, the study by Amante (2010), where 59.3 per cent of respondents were women, indicated
the presence of a significant wage differential between male and female BPO employees, with men
earning 13 per cent more than women. The reported gender pay gap is mostly explained by the fact that
men tend to occupy higher and better paid positions, such as technical and IT engineering jobs. Women,
on the other hand, are found in lower-skilled and lower-paid employment positions such as sales agents
and customer service representatives.
Formerly, moreover, Philippine labour law prohibited women from working night shifts (between 10
p.m. and 6 a.m.). In 2011, however, due to the growing contribution of the BPO sector to the national
economy and since most BPO employees were women serving customers in different time zones,
Decent Work Technical Support Team for East and South-East Asia & the Pacific 21
employers successfully lobbied for the repeal of this provision. Subsequently, new requirements for
employers were established, including mandatory transport services for women doing night shifts and
other social services, catering in particular to those with children. While the prevalence of night shifts
has closed the gap in demand and supply for BPO worker hours, it has raised concerns regarding work-
life balance for women.
Efforts are being made to address the concerns of women in the BPO sector:
Private sector initiatives. One of the firms interviewed, which was among the largest non-
voice BPO service providers in the Philippines, introduced a four-month maternity leave, going
beyond the minimum 60-day leave mandated by national legislation. At another company,
employees were granted a 90-day maternity leave if they had spent at least two years with the
firm. Another firm in the industry granted a six-month maternity leave, thereby improving the
gender balance within the company. Normally, however, the BPO companies followed a 60-
day maternity leave policy in compliance with Philippine labour law. But as salaries tended to
be higher than the social security contributions for maternity leave, some large BPO firms could
afford to cover the difference.
Telework from home provisions for workers with children. Among the largest BPO firms
interviewed, employees with children – regardless of their gender – were eligible for telework
from home. Moreover, to promote work-life balance, one of the companies surveyed offered
its employees the option of working half days on Fridays (compensated by working an
additional hour each day from Monday to Thursday). This allowed workers to spend more time
with their families (this initiative, however, was being promoted by the company’s headquarters
in the United States).
Dialogue between single parents and executives. As part of its employee engagement efforts,
one company interviewed promoted dialogue among female single parents and married
executives to voice their respective concerns and share their personal victories. This initiative
helped to reduce attrition among the employees involved. Moreover, the same company
celebrated a “women month”, when various activities were conducted with the goal of
empowering women and making them feel appreciated. Another company interviewed
promoted similar initiatives by allocating funds for the promotion of leadership activities and
career mentoring through women-specific resource groups.
4.4 Workers’ voice, collective bargaining and ability to organize
Trade union activities almost non-existent in the BPO sector, although in theory
workers in the sector can organize
In 1953, the Philippines ratified the fundamental ILO Conventions on freedom of association and
collective bargaining.
13
Commitment to these international labour norms are reflected both in the
Philippine Constitution and in the Labor Code. In fact, article 255 of the Philippine Labor Code provides
employees with the right to elect their representatives in labour management committees, effectively
allowing employees to participate in policy decisions that regulate their rights, benefits and welfare. In
13
Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87); Right to
Organise and Collective Bargaining Convention, 1949 (No. 98).
Decent Work Technical Support Team for East and South-East Asia & the Pacific 22
theory, therefore, workers in the BPO industry, as in any other sector covered by the legislation, are
allowed to form unions, participate in union activities and engage in collective bargaining with their
employers. In practice, however, union formation and activities in the Philippine BPO sector are very
limited or non-existent. Research indicates that employers in the sector tend to be opposed to unions,
as salaries and working conditions are already above national standards. Furthermore union activity is
seen by employers as unnecessary and something that would risk impairing the industry’s
competitiveness and growth (Amante, 2010). Among some BPO firms located in EPZs and PEZAs,
where there tends to be lesser government intervention, a “no-union” provision is sometimes stipulated
in employment contracts (Reese and Soco-Carreon, 2013).
Meanwhile, there is mixed evidence regarding worker perceptions of the need to unionize. Amante
(2010) found that 49.2 per cent of BPO employees expressed the need to have unions. The study by
Reese and Soco-Carreon (2013), meanwhile, revealed that Philippine contact centre agents do not
collectively organize for various reasons, including the following: i) they feel that their current job is
not part of their lifetime career; ii) they are discouraged from unionizing by their employers; iii) they
tend to solve issues with HR on an individual basis; iv) they underestimate market power; they are
intimidated by the complexity of employment agreements; they feel that unions are “something for
blue-collar workers”; and they share a prevailing antipathy for unions. Moreover, given the labour
shortages present in the industry, BPO employees may believe it easier to engage in “call centre
hopping” than to ask either directly or through a trade union for better working conditions from their
current employer. Hence, given an overall negative perception of unions, and given labour shortages in
the industry and abundant worker opportunity to change employers, no significant union activity is
being conducted in the Philippine BPO sector.
Efforts are being made to unionize workers and, in some cases, create avenues for them to express their
concerns or lodge complaints:
A “Magna Carta for call centre workers”, a recent effort to organize workers, has failed to
gain traction. In 2007, major trade union federations, with support from the ILO, attempted to
establish a union in the sector. More recently, political figures in the country have been trying to
push for stronger unionization in the BPO industry. In 2013, the introduction of a “Magna Carta”
for call centre workers was pledged by a member in the upper house of Congress, aiming to enforce
the right of call centre workers to organize and join labour unions, as well as to ensure better
contractual and OSH protection. Interviews conducted for this paper suggested that BPO firms
viewed this proposal negatively, as a widespread belief prevailed that the nature of work in the
industry was performance-based and any attempt at government intervention through “forced
unionization” could hamper sector growth and competitiveness, potentially scaring away foreign
investors.
Companies have tried to provide platforms for lodging complaints. Some BPO companies
encourage employees to file their concerns through a web portal, whereupon these complaints are
handled by the HR department. Under this system, grievance procedures can be monitored globally
by head offices (EILER, 2012). Other mechanisms include an “open door policy” and a helpline
made available to employees for expressing their concerns individually. In some cases, employees’
concerns are also addressed through annual satisfaction surveys, through which workers can
express their views anonymously. At one of the companies interviewed, feedback mechanisms were
implemented through monthly focus group discussions between managers and employees. Most
complaints received by employees at the companies interviewed were related to relations with their
Decent Work Technical Support Team for East and South-East Asia & the Pacific 23
superiors (whose management style was often regarded as excessively harsh), lack of career growth
opportunities, or workplace conditions (such as temperature and air-conditioning, or cleanliness of
bathrooms). Issues related to working conditions issues were often addressed immediately.
However, these measures are criticized by labour activists as a “top-down” approach on the part of
HR departments. Labour activists claim that HR practices are seen in the BPO sector as a substitute
for the role of unions in the promotion of workers’ rights (EILER, 2012).
Addressing decent work issues in the BPO sector would benefit from continued efforts to
provide workers with a stronger voice and greater powers of representation. It is clear that
workers in the BPO sector are not unionized. Furthermore, workers generally view the role of
unions in a negative light. But more effective promotion of better opportunities for organization
and bargaining could resolve many sector issues, particularly in the following areas: supporting and
encouraging additional training and skills upgrading; reducing stress at work; tackling the
prevalence of HIV/AIDS; and promoting more equal career advancement opportunities among men
and women. Addressing these concerns would help both workers and employers to alleviate the
problem of high staff turnover, which tends to lead to higher recruitment and training costs.
5. Conclusion
The growth of the Philippine BPO sector has provided over a million jobs, and BPO has become the
second-largest contributor, after remittances from overseas Filipino workers, to the country’s GDP. As
the industry moves towards maturity, technological innovations will likely bring a new wave of
development, creating a demand for higher skilled workers. The challenge for the Philippines is to
remain competitive as a BPO destination while ensuring decent work for over a million workers,
especially women, engaged in the sector.
While talent retention challenges remain, and technological innovation may widen skills gaps, the
Philippines has proven its potential to move towards higher value added in the BPO sector through
efforts by the Government, universities, IBPAP and individual MNEs. In this respect, the Philippine
BPO sector provides a positive example of economic upgrading through participation in service GSCs,
mostly by way of a localized development strategy. The remaining skilled labour shortages may
potentially contribute to a “race to the top” in working conditions, favouring social upgrading in the
industry. While social protection and effective compliance with national labour legislation are
becoming necessary to attract and retain workers, firm-level strategies are increasingly emphasizing
employee well-being programmes, and these often go beyond the minimum legal standards.
Union activities are virtually non-existent in the Philippine BPO sector. Employers generally mistrust
unions, while BPO workers still have only limited awareness of the benefits of joining unions, and
individualism prevails. Employers tend to adopt individual complaint mechanisms, and complaint
resolution often does not involve employees. This approach has been criticized by academics and labour
activists, who claim that BPO workers do not get to voice their real complaints for fear of losing their
jobs.
Civil society, along with the social partners, could play a role in strengthening workers’ voice and
representation by engaging in capacity-building and awareness-raising campaigns. The Government
could also play a role in creating a platform for social dialogue between workers and employers in the
Decent Work Technical Support Team for East and South-East Asia & the Pacific 24
BPO sector, aiming to foster mutual understanding of the remaining labour issues and pursuing a
tripartite approach to finding sustainable solutions.
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The Associated Chambers of Commerce & Industry (ASSOCHAM). 2014. “India’s losing 70 per cent
incremental voice & call centre business to Philippines: Study”. Available at:
http://assocham.org/newsdetail.php?id=4455 [8 Dec. 2016]
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http://www.tholons.com/nl_pdf/Tholons_Whitepaper_December_2014.pdf [7 Dec. 2016].
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Torres, E. 2014. “Philippines: A Magna Carta for call centre workers”. (Equal Times, 28 February) .
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[accessed 7 Dec. 2016].
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Decent Work Technical Support Team for East and South-East Asia & the Pacific 29
Annex
Table 3. Economic indicators for the BPO sector in the Philippines, 2004–13
Source: Bangko Sentral Ng Pilipinas
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Sales revenue ($ million) 1324 1996 2906 4368 6325 8258 10058 12074 13450 15305
sales revenue growth (% ) - 67.9 47.7 40.9 38.4 48.2 25.0 29.6 11.3 10.6
Export revenue ($ million) 888 1388 2288 3490 5288 7717 9470 11160 12503 14175
export revenue growth (%) - 56.3 64.9 52.5 51.5 45.9 22.7 17.8 12.0 13.4
Export-to-revenue ratio (%) 67.1 69.5 78.7 79.9 83.6 93.4 94.2 92.4 93.0 92.6
Total equity ($ million) - 492 622 934 1957 2587 4395 5746 7327 8367
equity growt h (%) - - 26.5 50.1 109.5 32.2 69.9 30.7 27.5 14.2
Foreign direct investment ($
million) - 329 376 821 1825 2376 4288 5355 6959 7815
FDI growth (%) - - 14.3 118.5 122.2 30.1 80.5 24.9 30.0 12.3
Foreign-to-total-equity ratio (%) - 66.9 60.4 87.9 93.3 91.8 97.6 93.2 95.0 93.4
US inves tment (% of total FDI) - 67.3 71.5 54.2 54.0 57.2 71.8 38.5 37.3 31.4
EU inves tment (% of total FDI) - 22.1 5.7 23.5 18.6 31.8 7.3 46.2 41.2 48.7
Employment (headcount) 94,488 138,002 248,045 271,556 355,135 444,811 536,128 679,464 769,932 851,782
employment growth (%) - 46.1 79.7 9.5 30.8 25.3 20.5 26.7 13.3 10.6
Annual compensation per
employee ($) 4989 5572 5105 7841 7778 7686 8398 8464 8849 9297
annual compensation growth (%) - 11.7 -8.4 53.6 -0.8 -1.2 9.3 0.8 4.5 5.1
Decent Work Technical Support Team for East and South-East Asia & the Pacific 30
Table 4. Economic indicators for the contact centre subsector, 2004–13
Source: Bangko Sentral Ng Pilipinas
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Sales revenue ($ million) 587 986 1455 2051 2839 4207 5260 6817 7587 8394
sales revenue growth (% ) - 50.8 45.6 50.3 44.8 30.6 21.8 20.1 11.4 13.8
share to to tal BPO sales revenue (%) 44.4 49.4 50.1 46.9 44.9 50.9 52.3 56.5 56.4 54.8
Export revenue ($ million) 561 949 1330 1732 2489 3938 5126 6166 7062 7578
export revenue growth (%) - 69.2 40.1 30.2 43.7 58.2 30.2 20.3 14.5 7.3
share to to tal BPO sales revenue (%) 63.2 68.4 58.1 49.6 47.1 51.0 54.1 55.3 56.5 53.5
Export-to-revenue ratio (%) 95.6 96.3 91.4 84.5 87.7 93.6 97.4 90.4 93.1 90.3
Total equity ($ million) - 243 281 596 1356 1387 2428 3063 3372 3864
equity growth (%) - - 15.9 112.0 127.3 2.3 75.0 26.2 10.1 14.6
share to to tal equity in BPO (%) - 49.4 45.2 63.8 69.3 53.6 55.2 53.3 46.0 46.2
Foreign direct investment ($
million) - 213 259 585 1309 1330 2421 3007 3338 3759
FDI growth (%) - - 21.7 126.1 123.7 1.6 82.0 24.2 11.0 12.6
share to to tal FDI in BPO (%) - 64.7 68.8 71.2 71.7 56.0 56.4 56.1 48.0 48.1
Foreign-to-total-equity ratio (%) - 87.6 92.0 98.1 96.5 95.9 99.7 98.2 99.0 97.3
US inves tment (% of total FDI) - 65.3 99.1 69.7 74.3 84.6 82.4 46.1 47.8 47.3
EU inves tment (% of total FDI) - 33.9 0.4 30.4 25.5 13.0 12.4 50.2 39.1 40.4
Employment (headcount) 65,006 96,246 153,683 169,748 212,372 255,765 329,597 433,183 487,757 530,882
employment growt h (%) - 48.1 59.7 10.5 25.1 20.4 28.9 31.4 12.6 8.8
share to to tal employment in BPO (% ) 68.8 69.7 62.0 62.5 59.8 57.5 61.5 63.8 63.4 62.3
Annual compensation per
employee ($) 5099 5772 4985 6420 7912 7640 8510 8240 8301 8569
annual compensation growth (%) - 13.2 -13.6 28.8 23.2 -3.4 11.4 -3.2 0.7 3.2
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Business process outsourcing in the Philippines: Challenges for decent
work
Advances in information and communication technology (ICT) have facilitated growth in
the business process outsourcing (BPO) sector, and the Philippines ranks among the world’s
major BPO destinations. This sector’s economic influence in the country has tripled in the last
ten years. Low labour costs, a highly skilled workforce and competitive ICT infrastructure
have provided the main drivers for this growth. While contact centres represent the most
important sub-sector in terms of revenue and employment, higher value added sub-sectors
are also growing. Overall, BPO is expected to expand rapidly in the coming years, further
strengthening the country’s participation in global supply chains (GSCs). At the same time,
this sector will face numerous challenges related to decent work.
A qualitative survey of the industry reveals four key findings: i) a real danger of skills
shortages threatens as employers struggle to find correctly trained workers and, once they
are hired, to retain them for longer periods; ii) employees report high-stress work
environments, with concomitant detrimental impacts on health, while an increasing
incidence of HIV/AIDS is evident among BPO workers; iii) more than 50 per cent of workers
are women, but they tend to be concentrated in low-paid, low-skilled work; and iv) trade
union activities are almost non-existent in the BPO sector. This study sheds light on efforts to
address these challenges, and draws lessons for the future. In general, the paper shows that
continued efforts to provide stronger voices and representation for workers could do much
to address the challenges in providing decent work.
... Business Processing Management (BPO) refers to the industry that involves the delegation of service-type business processes to a third-party service provider (DTI, 2003). It is part of the service sector, one which has seen over 10 percent growth for the last 15 years (Errighi et al 2016). This is observed to be parallel with the growth of the BPO industry which has tripled its market share in a span of 10 years from 2004 to 2014 and is forecasted to reach 19% by 2020. ...
... Together with this revenue growth is the expectation that more job opportunities would be made available to the aforesaid subsectors. In the same study of IBPAP, the headcount growth rate predominantly involves the same subsectors thus being almost similar vis-à-vis the employment growth of these subsectors in the previous years as portrayed by Errighi and Bodwell (2016). To date, the BPO industry continues to play a vital role in the economy of the country contributing a considerable percentage to its gross domestic product and being one of the largest industries employing millions of Filipinos across hundreds of outsourcing companies. ...
Article
Full-text available
The study investigated the perceptions of Business Process Outsourcing (BPO) workers on the integration of Artificial Intelligence in the workplace. It has been conducted to look into the impact of AI integration on the employment stability of the employees including their openness in utilizing AI. It also focused on their plans in the possibility of being displaced from their jobs and their willingness to accept government and non-government assistance concerning individual upskilling. The descriptive research design was used, and vital quantitative and narrative information were gathered through the use of a survey instrument and an interview guide. Cochran's formula was utilized to determine the sample size for the survey whereas interviews were conducted to the point that it reached data saturation. Results revealed that many participants are aware of AI integration in the BPO industry including its benefits. However, some are distrustful of AI efficiency. Most of them see themselves as being not part of the industry five years from now and are preparing for a career change and almost all are willing to receive help from both government and non-government agencies. It is suggested that BPO employees be presented with training for skills upgrading which is vital in shifting to tasks resilient of automation to be provided by public and private entities.
... Thus, despite critiques about poor security and the absence of long-term advancement in many of the digital jobs generated by the increasing "globalization" of business services, they are often viewed as a welcome source of "good jobs" locally. Such jobs are still predominated by business process outsourcing (BPO) work (Abara & Heo, 2013;Errighi et al., 2016). However, their difficult conditionslike the long hours in cramped cubicles, constant night shifts and sleep deprivation, high levels of stress, lack of professional advancement, along with the difficulties of daily commute-have pushed some workers to explore alternatives (Errighi et al., 2016;Fabros, 2016). ...
... Such jobs are still predominated by business process outsourcing (BPO) work (Abara & Heo, 2013;Errighi et al., 2016). However, their difficult conditionslike the long hours in cramped cubicles, constant night shifts and sleep deprivation, high levels of stress, lack of professional advancement, along with the difficulties of daily commute-have pushed some workers to explore alternatives (Errighi et al., 2016;Fabros, 2016). ...
Article
Full-text available
The article examines the role of social media groups for online freelance workers in the Philippines—digital workers obtaining “gigs” from online labor platforms such as Upwork and Onlinejobs.ph—for social facilitation and collective organizing. The article first problematizes labor marginality in the context of online freelance platform workers situated in the middle of competing narratives of precarity and opportunity. We then examine unique forms of solidarity emerging from social media groups formed by these geographically spread digital workers. Drawing from participant observation in online freelance Facebook groups, as well as interviews and focus groups with 31 online freelance workers located in the cities of Manila, Cebu, and Davao, we found that online Filipino freelancers maintain active social interaction and exchange that can be construed as “entrepreneurial solidarities.” These solidarities are characterized by competing discourses of ambiguity, precarity, opportunity, and adaptation that are articulated and visualized through ambient socialities. While we argue that these entrepreneurial solidarities do not reflect a passive and simplistic acceptance of neoliberal discourses about digital labor by digital workers, the solidarities forged in these groups also work to undermine their resistive potential such that these tend to reinforce rather than impose pressure toward critical structural changes that can improve the viability of digital labor conditions.
... Firstly, the research may produce constructive recommendations for RSSS to improve its management practices and reduce the issues faced by employees working from home. Secondly, due to the limited research literature regarding Philippines' BPO employees working from home, and the issues managers face in managing these remote workers, this study may provide valuable information to an industry that has more than 1.3 million workers as of 2014 (Errighi et al., 2016;Oxford Business Group, 2015;Yu et al., 2014). Lastly, the researcher has limited skills in research methodology. ...
... Over the past decade, the Philippines has become one of the top two BPO destinations in the world (Errighi et al., 2016), tripling its global market share to 12.3% in 2014, with forecasts to reach almost 20%, and USD $48 Billion in revenue by 2020 (Oxford Business Group, 2015). There are some downsides to this exponential growth of the Philippines' BPO industry. ...
Thesis
Full-text available
This study investigated managers' perceptions of employees inside a small Philippines' BPO company who migrated from an office environment to a home-based solution in 2017. The first objective was to research the literature on issues faced by managers and home-based employees within organisations. An extensive literature review was performed which revealed that trust, control and communication were key issues faced by managers who interact with remote employees. The literature also revealed that remote employees faced issues including computer faults, internet connectivity, distractions at home, and feelings of isolation. The second objective was to analyse managers' perceptions of home-based employees within the organisation in context. Managers were asked a series of open-ended questions in a semi-constructed interview format. Key findings: firstly, managers were divided about the success of the migration, although a small majority were in favour. Secondly, managers and employees experienced many of the same issues identified in the literature. Thirdly, managers' trust level on average had dropped significantly since the migration. Recommendations were made to improve managers' trust, and resolve issues faced by home-based employees. Further research is warranted as this study appears to be the only one of its kind in the Philippines' BPO industry to date.
... BPO industry (ie. Willis Towers Watson, 2015/2017), and fleeting information related to the adoption of FWA's (Remo, 2016) and well-being initiatives (Errighi et al., 2016), research regarding the effects on employees over time for these key areas was scarce. The researcher discovered perhaps the most detailed investigation of the Philippines' BPO industry by Estrada et al. (2007), which was commissioned by the Asian Development Bank. ...
... Female-dominated sectors of the BPO industry (i.e. call centre and data processing) are low-skilled and low-paid (Errighi et al., 2016). Yet females only represented 39% of senior and leadership roles according to a Grant Thornton survey (Medland, 2016), despite 66% possessing a business or administration related tertiary degree, and higher literacy rates than men (PSA, 2016a). ...
Thesis
Full-text available
Flexible work arrangements (FWA) give employees some autonomy over their choice of hours and place of work. Increasingly, they are being adopted by organisations in an effort to increase employee well-being and intent to stay. This dissertation is a case study into one particular type of FWA; working from home, and its effects on employee intent to stay at Remote Staff Support Solutions Inc. (RSSS), a small BPO company located in Manila, Philippines. The company has experienced a high turnover rate typical of the BPO industry. This research is significant due to the lack of research literature regarding FWA effects from the employee's perspective in the BPO industry and wider Philippines' labour force, and provides key recommendations for the company to reduce turnover. Three research questions were presented for resolution: What are the key advantages of the FWA from the employee's perspective, what effects do these FWA advantages have on employee well-being, and will the FWA influence employee intent to stay? A questionnaire was presented to 53 participants in a semi-structured interview in their home environment. The information was then collated, synthesised and categorised for further analysis and interpretation. The key findings were that there was a positive association between FWA's and employee intent to stay longer with the company. Further, employee well- being associated with the advantages of the FWA seemed to be a major influence on their decision to stay. Strong emotional responses on the issue of family time and caregiving were observed, along with the hypothetical cancelation of the FWA. Some negative associations of the FWA were discovered, namely technology issues, distractions at home, and isolation from work colleagues. The conclusions made from this case study are that work-life balance initiatives such as FWA's generally increase employee well-being, organisational commitment, work performance, and quality of family life. The recommendation to RSSS is to extend the FWA to assess the full implications on intent to stay to see if it does in fact reduce the turnover rate. Further recommendations include resolving technology issues, and to initiate well-being programs that are tied to work performance assessment.
... These issues are also experienced in the IT&BP offshoring sector in the region. For example, Errighi, Bodwell and Khatiwada (2016) identified skills shortages as a key concern in the offshoring sector in the Philippines. Despite using high wages as a "carrot" to keep employees engaged, there remains high employee turnover rates in the sector, causing organizations to struggle particularly in periods of high demand. ...
Article
The information technology and business process (IT&BP) offshoring sector in Asia continues to experience internal challenges and pressures from the external environment that lead to employee attrition. Despite the many human resources (HR)‐related interventions and practices, there remains a considerable turnover rate, not just within individual firms but across the entire IT&BP offshoring industry. We therefore question the current state of HR management within the sector and review the literature from 2000 to 2020. Utilizing the antecedents, decisions, and outcomes (ADO) organizing framework, we synthesize the different HR practices, their antecedents, and their outcomes. Our synthesis enables us to identify areas for future research, guided by the ADO framework, such as strengthening the theoretical grounding for the investigation of HR practices, greater contextualization regarding Asian culture, and acknowledgement of recent and emerging trends. These avenues can both build knowledge and inform practice as to how to effectively manage HR in the IT&BP offshoring sector in Asia, thereby reducing the high employee attrition rates.
... Despite these adverse physical and social health impacts, a lot of young people are still willing to engage in call center work mostly for monetary reasons. In 2013, the BPO industry paid an annual average compensation of $9,297 per employee, more than thrice the average wage of $2,580 in the rest of the country (Errighi, Khatiwada and Bodwell, 2016). The impacts of call center work have been investigated by scholars, but these studies fail to incorporate gender and sexual orientation, with the exception of studies on 'purple-collar' labor of transgender call center workers in the Philippines (David, 2015a(David, , 2015b(David, , 2016, the increasing number of gay men in the industry (Salonga, 2015), and a review of literature on the effects of call center work on women (Domingo-Cabarrubias, 2012). ...
Article
The impacts of call center work have been the subject of several studies, but currently, there is paucity of research about lesbian women in the Business Process Outsourcing (BPO) industry. Call center work poses several physical and social health concerns and the worker’s lesbian identity poses yet another challenge in navigating this work environment. This descriptive study used a qualitative approach. Ten (10) lesbian call center workers gave their narratives through semi-structured in-depth interviews in more than a year of doing fieldwork in Eastwood, Quezon City, Philippines. Working in call centers has multiple detrimental effects to health. The participants of the study experienced physical health issues that include voice problems, sleeping problems, unhealthy eating habits, and unhealthy vices such as smoking. Call center work has also affected their social health due to the inflexible and highly variable shifting work schedule, and lesbian call center agents were subject to subtle forms of discrimination in the office. There is a need to look into the effects of call center work on lesbians, as they are inevitably subject to physical and social health impacts, and these impacts are compounded by different forms of discrimination in the workplace.
... This booming industry has helped to boost the country's economy, which was once behind others in the Southeast Asian region, to one of the region's fastest-growing economies (Lee, 2015). It is projected that the call center industry in the Philippines will reach the equivalence of the remittances from foreign countries in terms of its economic importance ( Errighi et al., 2016). Moreover, the call centers in the Philippines serve as a main customer-facing conduit for the firms in various countries, thereby making the call center representatives in the Philippines increasingly important in providing a new level of client-relationship linkages between companies and target customers worldwide. ...
Article
Purpose This paper aims to investigate the contribution of cultural intelligence (CQ) to the interaction involvement and job performance of call center agents in the Philippines. Design/methodology/approach Data were collected from 213 call center agents from five business process outsourcing firms in the Philippines. Partial least squares structural equation modeling was used for data analysis. Findings CQ was found to be positively associated with the quality of interaction involvement and job performance of the call center agents. Moreover, the positive contribution of CQ to interaction involvement and job performance was significantly greater for those that had less call center work experience than those that had more work experience. Originality/value This study indicates that CQ not only matters in face-to-face communication but also is beneficial for non-personal communication, as with telephone conversation for example. In addition, this study showed new evidence –possessing high CQ tends to be more beneficial for agents that have less work experience.
Chapter
The advancement of technology in the workplace creates an innovative way of doing business and possibly enhances the productivity of the people and modifies new work practices. Focusing on call center services, the business process outsourcing industry is a major user of technology and an ever-changing and innovative technology in the corporate sector. Organizational restructuring and IT implementation are potential stressors that strain employees’ cognitive resources. This study develops a model that interplay technostress creators and cognitive workload in business process outsourcing industries. To achieve the objective of the study 383 respondents were surveyed. This study employed quantitative descriptive research as a research design. The structural equation modeling technique was used to test the relationship of technostress creators and cognitive workload. Findings showed that the measurement model satisfies the requirement of the exploratory and confirmatory factor analysis. Furthermore, the interplay model of technostress creators and cognitive workload were found positive and significant in techno-overload and techno-insecurity as predictors of cognitive workload. Overall the findings provide some insights to the managers of business process outsourcing industries the importance of cognitive process in the advancement of technology.
Chapter
Most contact center employees experience work related injuries, leading to decreased productivity and performance. The increased risk is due to poor workstation design, such as indecent noise level and duration exposure experienced by call center agents daily, while receiving and making calls on a headset or telephone. Some illnesses caused by prolonged exposure to unfavorable acoustics are headaches, increased anxiety levels, tinnitus, and noise-induced hearing loss. Mathematical modelling has only been applied in optimizing systems considering musculoskeletal disorders and only in other industries. Thus, it is important to consider the auditory ergonomic risks faced by call center agents mathematically. This study proposes Fuzzy Data Envelopment Risk Analysis (FDERA), a DEA-based risk analysis tool that considers the presence of imprecise data. The validity of the model is demonstrated using a case example. The results of the proposed tool are relative risk efficiency scores for each agent. Guidelines for interventions to improve risk efficiencies are presented using a matrix that provides possible preventive and corrective measures to address risks.
Article
Full-text available
This contribution presents findings from a qualitative study which focused on young urban professionals in the Philippines who work(ed) in international call centers – workplaces usually characterized by job insecurity and other forms of precarity, factory-like working conditions, and disembeddedness. Nevertheless, trade unions in these centers have not come into existence. Why collective action is not chosen by call center agents as an option to tackle the above mentioned problems – this is what the research project this article is based on tried to understand. After outlining some workrelated problems identified by Filipino call center agents, the article will focus on the strategies the agents employ to counter these problems (mainly accommodation and everyday resistance). By highlighting five objective and five subjective reasons (or reasons by circumstances and reasons by framing), we conclude that it is not repressive regulation policies, but rather the formative power and the internalization of discourses of rule within individual life strategies that are preventing the establishment of unions and other collective action structures.
Chapter
Full-text available
Offshoring and outsourcing are not recent by-products of the emergence of the new economy in services. The first wave of offshoring and outsourcing, encompassing the manufacturing sector, began in the mid-1980s, motivated by low costs, the availability of skilled labour, the promotion of a business-friendly environment and the existence of production and supply networks in places such as China, Republic of Korea, Malaysia and Taiwan (Bardhan and Kroll, 2003). At that time, it was predicted that developed nations, nurtured by giant multinational corporations (MNCs), would evolve into service-based economies (Dossani and Kenney, 2003), requiring buyers and sellers to be frequently available in the same geographic location (Henley, 2006). This implied that while manufacturing jobs would move to other areas of the globe, service jobs would remain in the West.
Article
Full-text available
This paper provides a profile of the Philippine business process outsourcing (BPO) sector; makes country comparisons with India and other BPO providers; and summarizes the results of an input-output analysis of the Philippine BPO industry's intersectoral linkages and its potential impact on compensation and employment. The Philippine BPO sector's growth is largely driven by the contact center subsector due to its large share in total BPO employment and revenues, as well as by government support. The input-output linkage analysis shows that the BPO industry is not a key sector in terms of stimulating production in other sectors of the Philippine economy. However, growth in the sector's revenues can have a significant impact on compensation and employment. An increase in the sector's revenues will generate a considerable increase in the sector's total wage bill and in that of the other sectors. If appropriate policies are enacted and with improvements in human capital, it is estimated that the Philippine BPO sector may become an important employment-generating sector. The sector can provide 7-11% of the new jobs for the labor force entrants between 2007 and 2010. It is also estimated that the BPO total workforce size will reach 500,000 to 600,000 in 2010, which is considerable for a single economic activity.
Article
Full-text available
The growth of the information technology enabled services-business process outsourcing industry calls for attention to employees' working conditions and rights. Can an independent organisation such as UNITES Pro (the union of information technology enabled services professionals) represent employees' interests and effectively work towards protecting their rights and improving their working conditions? A survey of UNITES members indicates that they identify with the need for such an organisation to deal with poor supervisory and managerial treatment, concerns for employee safety, grievances related to pay and workload, and even the indignities of favouritism.
Conference Paper
Full-text available
Background: The steep rise of HIV infection among MSM in the Philippines is alarming. Reports suggest that most cases are MSM working as call center agents (CCA). This study aims to determine the prevalence and risk factors for HIV infection among MSM in Manila. Methods: Legal-aged MSM were purposively sampled and interviewed from November 2009 to January 2010 from bars in Manila patronized by MSM clients. After counselling and psychological evaluation, rapid HIV screening was conducted using SD Bioline HIV 1/2 3.0. Rapid test positive samples were confirmed by Western blot. Results: Out of 406 MSM study participants, 48 (11.82%) were rapid test positive; of whom 40 consented to proceed to Western blot, giving a prevalence of 9.85% confirmed HIV infection (95% CI 6.9%-13%). The mean age of participants was 26.2 years (SD 5.4). Among 385 who disclosed their occupation, 130 (34%) were CCA, 24 of which were confirmed HIV positive. On logistic regression, two independent risk factors to acquiring HIV were identified: working as a CCA (OR 3.44; 95% CI 1.51-7.83) and having occasional unprotected sex (OUS) with a stranger as an anal receiver (OR 4.97; 95% CI 1.04-23.71).On the other hand, always using condoms when having sex with a significant partner as an anal inserter (ASP) is associated with reduced risk (OR 0.05; 95% CI 0.00-0.89). Age, educational attainment, age of first sexual contact, number of sex partners, and history of sexually transmitted infections are not significantly associated with HIV. Conclusions: The prevalence of HIV among MSM in Manila is high. OUS and working as a CCA are independent risk factors to acquiring HIV. ASP has a significant protective effect. MSM who are CCA may be a novel vulnerable group in the Philippines. Studies and interventions to reduce risks should be initiated targeting MSM working as CCA. Suggested Citation L.M.Gangcuangco, et al. Changing risk factors for HIV infection among men having sex with men in Manila, Philippines. : AIDS 2010 - XVIII International AIDS Conference: Abstract no. TUPE0391
Article
Full-text available
Organisations in the information technology enabled services sector have been very successful in using exclusivist and inclusivist strategies to keep unions at bay. These strategies have reinforced the notion of culturalism that aims at winning the "hearts and minds" of employees, by managing what they think and feel, and not just how they behave. The objective is to illustrate how these management strategies play out in call centres in India. The article is based on interviews carried out with call centre employees in Bangalore.
Chapter
This chapter offers a glimpse of the highly globalized BPO ‘industry’: the customer or client is in the US or any other English-speaking country, while the employee sits with a computer in a cubicle in some remote corner of Manila in the Philippines. This study identifies key aspects of the interaction between new technology and people and processes in information technology-enabled services (ITES). This section describes employee characteristics, patterns of work organization, working conditions and employment practices in offshored work in Philippine business process outsourcing (BPO) companies.
Article
While the Philippines has one of the lowest HIV prevalence rates in the world, an unprecedented increase in recent years seems to indicate that a large epidemic is only be a matter of time. Multiple factors including poor condom use, increasing rates of casual sex, and misinformation, are ingredients for the widespread emergence of HIV. Financial consequences will be significant since the Philippine economy is increasingly driven by industries employing young people who are at risk. Recent research showing better clinical outcomes for early treatment with antiretrovirals (ARVs), coupled with data demonstrating a drastic reduction in transmission with early therapy, provide a compelling argument for a universal test and treat strategy. With just over 7,000 confirmed cases, this approach is financially feasible, and is an efficient model for proof-of-concept.
Article
Call centre employees do not want to be part of trade unions because they associate the latter with "blue-collar workers" and not with their own perceived upward mobility. Also, their work schedules and the highly modernised self-contained work islands they inhabit encourage them to think of unions as unnecessary.