Expanding a business operation can be a costly move. It requires hiring and training additional human resources and building or renting more office spaces.
This aspect of operation expansion often becomes a hurdle for businesses or companies wanting to scale and expand. As a result, small or startup companies are discouraged from expanding because the additional costs often outweigh the gains.
Fortunately, there is now an abundance of companies willing to provide other companies with the human and material resources they need to expand their operations – often at a lower cost than if they expanded on their own.
These third-party service providers – commonly referred to as outsourcing companies – help businesses reduce their operating and labor costs by getting resources from countries with a lower cost of living.
What are operating and labor costs?
Operating and labor costs are expenses incurred by a business or company as it runs its day-to-day operations. While the two may sound synonymous, they pertain to different cost aspects.
Labor cost is the total sum of all expenses paid by a company in wages to its employees. It also includes the costs associated with employee benefits and their salary taxes.
Labor cost has two categories: direct and indirect, or overhead, costs.
Overhead costs, which also include the operating costs, refer to the often static expenses disbursed by companies in the form of employee salaries for support personnel (HR staff, security, etc.), payment for the operations facilities, and equipment and facilities maintenance.
On the other hand, direct costs include all expenses directly related to producing a business’s products or services. This may include wages for employees working in the product assembly or service rendition and software, equipment, and materials used in production.
How can outsourcing with StaffWiz reduce labor costs?
Cost reduction is one of the most touted benefits of outsourcing. This is especially true if you choose to outsource with StaffWiz.
With StaffWiz’s outsourcing solutions, you can achieve up to 70% labor cost reduction without sacrificing your product or service’s quality.
How does StaffWiz do this? By outsourcing to the Philippines.
The Philippines has a much lower cost of living compared to even its Southeast Asian neighbors.
As of 2021, the country’s minimum daily wage is approximately USD 9 – significantly lower than the minimum hourly wage paid to US employees.
To look at it more clearly, let’s compare the annual average income of a software developer from the Philippines to the US counterpart.
The Filipino developer earns a yearly salary equivalent to USD 7,174. This amount is roughly 89% smaller than the USD 69,589 average annual salary of their US counterpart.
Thus, by outsourcing with StaffWiz and having a Philippines-based workforce, you’ll be able to cut down on employee salary by at least 70% to even 89%. This is on top of the fact that StaffWiz will also shoulder these employees’ entire recruitment, hiring, and training costs.
Suppose you’re worried that your product or service quality will decrease alongside the labor cost. In that case, you’ll be relieved to know that Filipino workers are not only among the most loyal but also the most culturally adaptive and hardworking employees you’ll find.
Are there other benefits from outsourcing besides labor cost reduction?
As mentioned earlier, cost reduction is one of the most well-known advantages of outsourcing business processes. However, it is by no means the only benefit that outsourcers stand to gain.
Outsourcing provides companies with numerous advantages that can help them achieve more with less:
Improved in-house staff productivity
Delegating mundane and repetitive back-office operations to outsourcing companies enables your in-house employees to focus on the more critical aspects of your business.
When you outsource, you’ll often be handing over your processes, such as data entry or customer support, to another company specializing in that particular operation or having a standby team of specialists.
This is especially beneficial when your base of operations is in an area that lacks the human resources your company needs.
Easy access to global expansion
Outsourcing makes global expansion more achievable as it gives you access to a workforce that’s already positioned in a particular local market.
As outsourced staff and facilities are more cost-effective, even startups can afford to expand their operations in overseas locations.
More human resources flexibility
Having outsourced personnel gives you more staff versatility. You can request a talent pool increase if demand rises and reduce this pool when it ebbs.
The employee addition and reduction will not be a hassle for your organization as the outsourcing company would handle it through its own human resources department.