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Full work-from-home setup for BPOs: Will it cause a provincial shift?

With the Philippine government currently pursuing the shift of business process outsourcing (BPO) firms to implement 100 percent work-from-home (WFH) schemes, certain trends in the industry are also brought to fore. Professional services and investment management company Colliers, for instance, observes the following:

The strategy of BPO companies is definitely changing. With BPO employees choosing WFH setup and choosing to stay in their provinces, companies are now seeking to take advantage of this scenario and are diversifying their work sites and opening offices in different locations outside Metro Manila. This allows them not only to follow their talent, but to also discover areas that will give them an advantage over their competitors, such as access to better talent pool, lower operating costs, and the first-mover advantage.

Then again, are we going to see this provincial shift in considerable scale in the near future? In attempting to unravel the prospects of the Filipino BPO industry, it would also be of benefit to examine and understand what went before.

Bpo Industry

From PEZA to BOI

To recall, the Fiscal Incentives Review Board (FIRB) has long supported the full reopening of the economy, as exhibited in their Resolution 019-21, and this mandate to “return to office” (RTO) included the BPO industry. Accommodating calls to extend the prevailing WFH setup, however, the Philippine Economic Zone Authority (PEZA) has issued letters of authority to permit their registered business enterprises (RBEs) to implement a hybrid setup (up to 30 percent work-from-home) until September 12 of this year, while still retaining their fiscal incentives. This state of affairs was also backed by FIRB Resolution No. 017-22, dated June 21, 2022.

Soon enough, even that temporary measure had run its course.

Pursuant to FIRB Resolution No. 026-22, which was issued on September 14, RBEs which continued to have a hybrid setup (30 percent work-from-home) would be allowed to remain so until December 31, 2022. The resolution noted how the President Ferdinand Marcos, Jr.’s Proclamation No. 57, s. 2022 had extended the existing state of calamity until the said date. Another significant decision reflected here involved the transfer of RBEs in the BPO sector to the Board of Investments (BOI) if they seek to implement 100 percent work-from-home schemes.

In line with this, the Department of Trade and Industry (DTI) released their Memorandum Circular No. 22-19, s. 2022 on October 18 to provide guidelines for the registration of RBEs in the BPO sector with the BOI. More specifically, the circular covered affected RBEs which enjoy the following fiscal incentives:

  • Remaining tax incentives under Section 311 of the National Internal Revenue Code of 1997 (NIRC), as amended
  • Approved incentives on or before 14 September 2022 under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) with the concerned Investment Promotion Agency (IPA)

When these incentives have lapsed, existing RBEs are eligible to apply for additional incentives provided the activity is listed in the Strategic Investment Priority Plan (SIPP), and there is a new investment or qualified expansion. For its part, PEZA issued Memorandum Circular No. 2022-067 to guide its locator companies on the said transfer. PEZA, nonetheless, considers the “paper transfer” of registration to BOI as an interim measure.

“We hope that in the immediate term, a new law or policy will be put in place to institutionalize hybrid workplace for ecozone IT locators to avail of increased WFH threshold with incentives and for the transferee RBEs to retain their PEZA status so they can benefit from the agency’s one-stop service and the IT centers’ conducive business environment. In all these, we expect that PEZA will retain its mandate to promote and facilitate investments and keep the separate customs territory status vested in the ecozones to ensure the competitiveness of our IT sector,” explained PEZA Deputy Director General and Officer-in-Charge Tereso O. Panga.

Notably, the trend of preferring WFH to stay even after the pandemic could also be witnessed among other workers in the Asia-Pacific region, as demonstrated by a survey done last March by the International Data Corporation (IDC).

Going beyond Metro Manila?

As the year 2023 arrives, the aforementioned stipulations would eventually come to pass, and it appears like WFH is here to stay for BPOs in the Philippines. How many are in contention? CNN Philippines notes that there around 2,000 BPO firms which may be set to transfer from PEZA to BOI, an estimate corroborated by BusinessWorld. Taking these policy moves into consideration, Colliers reports:

This development has encouraged many BPOs to expand their office footprint outside Metro Manila, and fast track the setup of operations in the provinces, long been seen as an untapped resource for BPO players talent wise. Now with the mandate to implement WFH setups, BPOs are chasing after talents who prefer to settle back in their hometowns.

In an earlier study on the property market, Colliers takes notice how over half of total office space transactions to the provinces (56 percent) were from BPO companies. Furthermore, Colliers finds that PEZA-accredited spaces in Metro Manila are four times greater than in the provinces as of the first half of 2022. The disparity is not as large when it comes to non-PEZA spaces, which only has 50 percent difference between Metro Manila and the provinces. Whether or not this trend holds, it remains to be seen, as Colliers also expects increased demand for “flexible workspaces.”

The prospective shift to the provinces primarily due to the resolution of the WFH issue, however, has not only highlighted the supposed divide between urban and rural areas, or the perceived contest for talent. BPO workers already returning to their offices to perform their duties also have their own concerns to raise.

“Bakit hindi na lang kami bigyan ng tax holiday? Malaking bagay ang PHP 3,000 na tax namin. O kaya dagdagan nila, ayusin nila, gawin nilang standard yung mga suweldo ng BPO workers. Kung ngayon nasa PHP 13,000 – 16,000 entry level plus allowance, bakit gawin nilang nakabubuhay, gawin nilang PHP 30,000?” asked Mylene Cabalona, spokesperson of the BPO Industry Employees Network (BIEN), as she observed the costs of travelling to work.

Salary Explorer currently places the average salary of call center agents in the Philippines at PHP 30,600 a month. Talent.com has provided an average salary of PHP 27,250, while Indeed has placed the average wage at PHP 25,873. To better put things into perspective, Metro Manila still has the greatest minimum wage among the regions in the Philippines, which is around 20 percent higher than the next highest region (nearby CALABARZON). If rates in the BPO sector would be uniformly competitive across the country, would it further incentivize working in the province?

IT Business Process Association of the Philippines (IBPAP) Chief Policy and Regulatory Affairs Officer Celeste Ilagan said the goal 1.1 million additional jobs for Filipinos by 2028 can be achieved if hybrid work is maintained.

“So kahit medyo rural, as long as mayroong internet connectivity, then puwede kaming makapag-hire doon sa mga lugar na iyon,” she explained.

Chatgpt Call Center

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The challenge of AI to BPO skills?

Besides the expected exodus of BPO firms to retain their fiscal incentives, another noteworthy development in recent weeks is the prospect of AI replacing human jobs, including those in the call centers. ChatGPT, a language model trained to produce text, grabbed headlines as it performed so well, some had taken seriously the possibility of AI taking out a number of existing occupations. For its part, The Register wrote on US-based technology research firm Gartner’s estimates of up to USD 80 billion in savings for call centers if humans would be replaced by AI chatbots by 2026. That would mean having nearly 10 times more automated interactions than the current level of 1.6 percent.

The Philippine government, however, does not seem fazed by the possibility of the nation’s BPO workers being outmatched. President Marcos himself cited the BPO industry as example of workers ramping up efforts to upskill.

“Yung micro-credentials, it’s not a four-year course. It’s not a degree. But you can present this to qualify for a job,” President Marcos said in a meeting with members of the Private Sector Advisory Council (PSAC).

The provincial shift, however, may also require a similar move to accommodate further learning in areas of concern.

“The first set of recommendations have to do with the formal education system, especially increasing the number of universities/colleges and quality of centers of excellence of IT-BPM-related programs along with enrollment rates with a dedicated focus on provincial cities such as Iloilo, Davao, Tuguegarao, Baguio, Cagayan de Oro, Puerto Princesa, Laoag, and others,” elaborated economist Dr. Bernardo M. Villegas in his column with the Manila Bulletin.

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Avatar for Arius Lauren Raposas

A public servant with a heart for actively supporting technology and futures thinking, responding accordingly to humanity's needs and goals, increasing participation of people in issues concerning them, upholding rights and freedoms, and striving further to achieve more despite our limited capacities. In everything, to God be all the glory.

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