It is undoubtedly the case that the Philippines has become an increasingly attractive location for global businesses looking to expand into the ASEAN region. It has become a popular location for outsourcing, and for hiring workers and contractors in a wide range of industries, not least the finance and technology sectors.
There are several reasons for this, not least the quality of the labour force, the positive business environment, the country’s location within Asia, and its growing tech infrastructure.
Labour force and costs
One of the primary reasons for expanding into the Philippines is that it has a high quality, educated, literate and English-speaking workforce. Many workers are keen to work with foreign companies because of the enhanced opportunities this offers them, along with giving them the chance to make the most of their qualifications.
At the same time the labour costs in the Philippines are relatively low, given the overall skill levels and commitment of the workforce.
Business environment
The Philippines offers a business-friendly environment and has implemented a series of laws and tax incentives designed to encourage foreign investment. There are also a significant number of free trade agreements in place, while the fact that many foreign enterprises are already operating out of the Philippines makes it an exciting and energetic location in which to operate.
Overall, the Philippines is one of the fastest growing economies in ASEAN and is thus an ideal base for foreign enterprises looking to expand into the region.
Physical location
Both physically and economically, the Philippines is at the heart of the ASEAN region and is near Asia’s most important financial markets, making it the ideal hub for enterprises aiming to establish themselves in this vibrant, growing region.
Tech infrastructure
Internet infrastructure is a high priority in the Philippines, and an extensive network of fiber optic cabling is being installed with the aim of significantly boosting the country’s ranking in terms of mobile and broadband internet speeds.
Challenges businesses face when expanding into the Philippines
While there are many incentives designed to encourage businesses to expand into the Philippines, there are still several challenges that foreign companies are likely to face when outsourcing and hiring Filipino workers.
Firstly, labor laws are more heavily weighted in favor of employees than in many other comparable jurisdictions, and it can be a challenge to grasp these without local knowledge. Likewise, not having an in-house HR team on the ground can make it difficult to ensure compliance with other aspects of employment law.
If you are new to the Philippines or are managing teams in several locations simultaneously, having up-to-date working knowledge of the tax and labour laws can be difficult, while setting up and funding an HR department (especially in the early days of an expansion) can be prohibitively expensive.
Further to this, finding suitable workers without direct access to the employment market can be difficult. Then, once workers have been hired, ensuring they are classified correctly in terms of tax and other deductions, can be challenging without local experience and knowledge.
Following on from this, ensuring ongoing payroll services operate smoothly, and maintaining employment records efficiently, can also be a challenge for enterprises who are expanding but don’t yet have a local legal entity in place.
What is a PEO and how does it support business expansion?
Given some of the issues described above, using the services of a professional employment organization (PEO) can be an efficient and cost-effective solution for any business looking to expand to the Philippines. A global PEO also known as an employer of record enables companies to hire locally by being the official employer of record in that country, enabling the hiring company to get on with its day-to-day business and management of its new employees.
Making use of a specialist Philippine PEO provider can help both startups and more established businesses alike. They essentially make the process of hiring and managing overseas teams more straightforward, with the local PEO based ensuring that the overseas hiring company is complying with labour laws without the need to hire local HR staff or by having to set up a legal entity in the Philippines.
Hiring foreign workers using a PEO
In the initial stages of an expansion into a new market, it is not necessarily cost effective to set up a local legal entity. At the same time, however, not having a team in place can make it difficult to ensure compliance with regards to correctly classifying workers in terms of their tax rate, employment conditions, leave entitlements, etc.
A PEO enables foreign companies wanting to hire workers in the Philippines to outsource these and similar HR functions. These include finding and hiring employees, managing payroll and employee records, ensuring appropriate tax and other deductions are being made, and, if necessary, overseeing the termination process. All of this can be achieved through the services of a PEO and without the need to set up a legal entity.
In this way, you can access the skilled talent pool in the Philippines at significantly reduced costs, with the PEO taking care of all the administrative, payroll and HR tasks while you manage the workflow and roles of the Filipino workforce in the same way as you would with employees in your home country.
The reduced costs associated with hiring a PEO, plus the time efficiencies it delivers, means that you can take on the talented workers you need, while at the same time freeing up resources that are better directed towards operations, essential in the expansion phase of any enterprise.
