The $500 Question: A Dive into Outsourcing in the Philippines
The Philippines has earned a global reputation as a go-to for companies looking to outsource work. Businesses from different countries hand off some of their operations to the Philippines because of lower costs.
If we compare the wages with Western countries, the average salary in the Philippines is significantly lower. The difference in cost is a lot, especially for SMBs who want to save on operating expenses.
But this leads to a question many may ponder: "How do Filipinos manage on a $500 monthly salary?"
What’s The Average Income in the Philippines?
According to the Occupational Wage Survey in 2022, the Philippines’ average monthly income for full-time workers is more or less P18,423 ($326.79). It’s a lot lower compared to the average in the US, which is $6,228 per month.
Filipino professionals earn 70% to 90% less, even with the same responsibilities and tasks. This pay gap highlights the economic differences between countries and the cost advantages many businesses get when outsourcing work to the Philippines.
How much can you save by outsourcing work to the Philippines? Download our FREE salary guide to know more!
Being aware of these numbers allows you to understand why outsourcing in the Philippines should be an option for you.
Apart from cost savings on your business, it also sheds light on the financial realities your potential Filipino workers face. Knowing the Philippines’ average income and more can help you plan your outsourcing strategies more effectively and ethically.
6 Essential Factors Affecting Wages in the Philippines
There are factors influencing wages in the Philippines. These are:
Educational background
In the Philippines, education plays a significant role in determining salary. Most local and multinational companies require at least a bachelor's degree because they believe it’s proof that an applicant is work-ready.
On average, degree holders can expect a monthly starting salary of about $333. But for those who finished until high school or took up technical vocational programs, most earn less than the average monthly minimum wage.
Regional rates
The Philippines has varied wage rates across regions.
Rural areas offer the lowest salary ranges due to cheaper living costs and other factors. This means that where you work in the Philippines can significantly impact your income.
Filipinos in Metro Manila register the highest minimum wage, followed by those in CALABARZON.
Cost of living
The Philippines ranked 152nd out of 197 countries by cost of living. Living in the Philippines costs around $613 per month, 1.66 times less expensive than the world average.
Now, here's something interesting: many Filipino families have three generations living together in one house. This means that grandparents, parents, and children often share a home.
This living arrangement is quite common in the Philippines. So, when we talk about the cost of living, it's not just about individual expenses but also the shared costs among different generations in a family.
Bonuses, incentives, and other benefits
Many companies provide extra payments like a 13th-month pay, Christmas bonuses, and additional perks, which can boost the total annual earnings.
The 13th-month pay is mandatory and should be given on or before December 24. The good news is that it's not taxed up to a limit of P90,000 ($1,601.51).
Christmas bonuses, on the other hand, depend on the employer. It’s not a requirement, but it’s a way for employers to show appreciation to their employees. The date it’s given and the amount can vary.
Other benefits fall under the same limit as the 13th-month pay. It’s good to note that if the total of “other benefits” and the 13th-month pay is less than P90,000, no tax is applied. But if the combined total exceeds this limit, the extra amount will be subject to income tax.
Industry
Salaries can also differ across industries. Here are in-demand roles in the Philippines and their salary ranges to give you a better idea.
Want to know how much you can save on labor costs? Get a copy of our FREE salary guide.
Collective bargaining agreements (CBA)
CBAs are critical in ensuring fair compensation. It’s a special agreement or contract between workers (usually represented by a labor union) and their employer.
CBAs help negotiate better wages and benefits for employees. It helps make sure that everyone is treated fairly at work, and it's a way for workers to have a say in the conditions of their employment.
Is a $500 Monthly Salary in the Philippines Really Enough?
Living with a $500 monthly salary in the Philippines is more feasible than in many other places. As mentioned, this is thanks to the country's relatively low cost of living.
So, to answer the $500 question, here are a few insights on Filipino household expenses:
Food
A survey by Pulse Asia Research on household expenses found that 95% of Filipinos have increased their spending on food.
Filipinos today deal with rising food prices, and rice tops the list of more expensive food. 83% of the respondents spend more on rice, while 61% spend on other foods besides rice.
The Philippine Statistics Authority (PSA) says that, on average, a Filipino eats 118.81 kilograms of rice each year. That's like having 325.5 grams of rice every day.
The average retail price for regular well-milled rice is P42.80, while for well-milled, it is P45 per kilo. So, a person would have to spend more or less P445 each month for this staple.
Electricity
The average monthly consumption of a Philippine household is around 200kWh. About 62% of the Filipino adult population reports spending more on electricity in 2023.
The Manila Electric Company (Meralco) announced an upward adjustment to electricity rates this January, bringing rates to P11.3430 per kWh. This brings the average Filipino household to spend P2,268.6 per month on electricity.
Transportation
In the Philippines, many people rely on their own vehicles for transportation, with about 22.55% using cars and 14.54% using motorcycles. However, 59.48% of Filipinos prefer public transportation like buses, jeepneys, or trains.
Recently, fuel prices in the country have increased, affecting 22% of survey respondents who spend on fuel. Starting January 30, 2024, oil companies raised the prices by P2.80/liter for gasoline, P1.30/liter for diesel, and P0.45/liter for kerosene.
But most Filipinos continue to use affordable public transportation, where jeepney fares start at P12 for the first 4kms and airconditioned buses begin at P15, with non-airconditioned ones at P13 for the initial 5kms.
Understanding how a $500 monthly salary works in the Philippines provides a glimpse into the country's economic dynamics. It highlights how income levels and living costs interact, affecting the day-to-day lives of many Filipinos.
Why Choosing the Philippines for Outsourcing is a Win-Win
Outsourcing in the Philippines is a great deal for everyone involved, and here's why:
Better pay for Filipino workers
Most of the time, people who work in Business Process Outsourcing (BPO) jobs get higher pay, health benefits, and extra money for things they might need. This makes these jobs really attractive to people living in the Philippines.
So, when companies from other countries decide to outsource to the Philippines, they find lots of skilled workers who are ready and happy to do a great job.
Access to top Filipino talent
The Philippines offers a large pool of skilled and English-speaking workers, making communication smooth and effective. This advantage lets you focus on your core tasks while outsourcing non-core functions to Filipino professionals who excel in various fields.
Huge savings on labor costs
The cost of labor in the Philippines is lower than in many Western countries, allowing businesses to save money without compromising the quality of work. This cost-effective approach creates a win-win situation, benefiting both the outsourcing company and the skilled workforce in the Philippines.
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