Setting up a back office in the Philippines
Outsourcing your back office tasks will help your business become more efficient. Here's why you should set up a back office in the Philippines.
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The back office usually refers to company personnel in charge of doing tasks that don’t involve interacting with customers or clients. As your business grows, it is important to expand your back office. Staying on top of your administrative and operational functions ensures that your business stays productive and efficient.
Because these are not client-facing roles, a lot of companies choose to set up their back offices abroad. Foreign companies are particularly attracted to the Philippines because Filipinos are also known for speaking English making communication much easier.
With a young and skilled workforce, there is a lot of interest in setting up a back office in the Philippines.
The Philippines is home to a young and educated workforce. The median age in the country is 25.7 years old according to Worldometers. Statistics from the country’s Commission on Higher Education also show that in recent years, the country produces at least half a million post-secondary graduates.
There is also a thriving business process outsourcing (BPO) industry in the country showing that the Philippines is a tried and tested location for outsourcing. Choosing the Philippines as the location for your back office is an obvious choice.
To boost productivity, some companies delegate non-core business activities to third-party providers. BPO providers can handle different business functions including back office tasks.
Some business activities outsourced to BPOs:
- HR functions
- Payroll management
Social and cultural factors contributing to the growth of the BPO industry in the Philippines
The BPO industry in the Philippines is strong and continues to grow. We’ve already mentioned that the workforce is young and educated, but another reason for this is the high level of English proficiency of its people. According to the 2019 EF English Proficiency Index, the Philippines ranks 20th out of 100 countries in terms of English skills. Other than Singapore and Malaysia, the Philippines is the only other Asian country with a high proficiency rating.
Exposure to widely recognized and accepted Western cultural influences make it easier for Filipinos to communicate and interact with the foreign market. Filipinos are also familiar with idioms used in other countries because of the ease of access to foreign media.
How does a BPO work as your company’s back office in the Philippines
Outsourcing to a BPO is like hiring a company to do a service for you. When you delegate business activities to a BPO, they will assign the tasks to a relevant team within their company.
Outsourcing back office functions could save your business money because labor costs in the Philippines are quite low. Because you don’t need to worry about additional workspaces, expansion costs are also very low. Foreign companies have saved 30% to 40% of business costs through outsourcing.
Challenges of using a BPO service
BPO providers select which people will work on the tasks delegated to them. Clients usually cannot choose the employees assigned to work on their projects. Additionally, the BPO may reassign the project without notifying the client. Because of this, you will not be able to truly integrate these employees to your company.
Additionally, BPOs have their own set of regulations and standards. These may not always comply with your business’ standards and could cause conflict between parties.
Per the Philippine Board of Investments, a representative office is a foreign business established under foreign laws. Think of it as an extension of the parent company. Representative offices may not generate revenue or participate in commercial activities in the Philippines. However, they can perform administrative and technical activities to support the parent company.
However, it is not always easy to set up a representative office in the Philippines and processing may take longer than expected. Companies interested in registering a representative office often have some trouble with supporting documents.
For example, financial documents may not be clear or strong enough for the company to get approval right away. The company must also remit the minimum capital requirement before the representative office can get its license to operate.
Setting up a back office using a representative office
It is possible to use a representative office in the Philippines as your back office since the tasks will not generate any income for the business.
To set up a representative office in the Philippines, the parent company must register the representative office with the Securities and Exchange Commission (SEC). They must also assign a local representative who is a resident of the Philippines.
The parent company also needs to have existed for at least 2 years abroad and should have a strong financial standing.
The representative office must also have a minimum capital of USD 30,000. The parent company will have to remit the same amount annually to cover the operating expenses of the representative office.
The parent company will also have to present authenticated documents of the company, like Articles of Incorporation or Certificate of Registration.
Domestic corporation as an alternative to a back office
A representative office is not the only way for you to set up a back office in the Philippines. Another option is to register a domestic corporation. It should be an export entity where at least 70% of the income comes from abroad.
This is a much faster way to get set up. Unlike with a representative office, you will not need to submit documents from your parent company. The required investment is also lower, and there is no need to remit the money before your bank account is set up.
Requirements for a domestic corporation:
- 2-15 directors, can all be foreign nationals or entities
- Treasurer in trust, must be a Philippine resident
- Corporate secretary, must be a citizen of the Philippines
- Paid up capital
As an export entity, your paid up capital can be quite low. The minimum is USD 100, but we recommend investing 6-12 months’ worth of your planned expenses. Contact us to learn more about setting up a domestic corporation in the Philippines by filling out the form below. You can also email us [email protected].
Another option to conduct back office tasks in the Philippines is to use an employer of record. An employer of record is a service provider who can hire and manage employees who work for other companies. This means that it is possible for you to hire employees abroad without setting up a legal entity in their country.
Also, learn how to hire remote software developers using an employer of record.
Finding back office staff
Emerhub can be your employer of record. Get in touch with us and let us know what back office positions you need filled. We already know the market well, so we will find the right candidates for you. You can leave the entire recruitment process with us.
Providing work stations
If there’s a specific setup that you need your staff to have, the employer of record can help you and your employees with that. Companies cannot request BPOs to create or change their employees’ work stations to suit your needs. With an employer of record, you can treat your remote staff the same way you treat your local staff.
As the employer of record, Emerhub will take care of matters concerning payroll. This includes distributing wages and computing and filing your employees’ taxes.
Local HR support
Some companies have gone the route of hiring freelancers to fill back office needs. Because freelancers cannot be truly integrated into the company, it can be difficult for them to address HR concerns.
With an employer of record, your employees will have local staff they can contact regarding HR concerns like leave requests, issues with tools, and the like.
Email us at [email protected] to get help with setting up your back office in the Philippines! You can also fill out the form below to get in touch with us.
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