If your accounting firm has taken the leap into offshoring, are the average salaries you’re paying to your Filipino accountants and bookkeepers in line with the going market rate?
Are you offering a median salary and benefits package that will retain this top talent?
We sat down with Lalaine “Lala” Paiton, Recruiting Team Lead at TeamUp, to discuss salary ranges, benefits, and cost savings when creating your ideal accounting team. Plus, the pros and cons of opting for direct hiring or using business process outsourcing (BPO).
It’s no secret that there’s a talent shortage in accounting.
The American Institute of Certified Public Accountants (AICPA) estimates that about 75% of CPAs had reached retirement eligibility by 2020. Plus, the number of graduates entering formal accounting training and courses is dropping in territories like the USA and Australia. CPA Australia found that the number of students completing bachelor-level and above programs in accounting had almost halved in the decade to 2020.
Many forward-thinking US and Australian accounting firms are addressing this shortage by exploring the benefits of offshoring their accounting workload to the Philippines. It’s a cost-effective model that provides your firm with highly professional, qualified accounting staff to resolve your talent shortage.
As Lalaine outlined to us, the accountancy profession is booming in the Philippines, generating a talent pool of ambitious, qualified remote employees.
“In terms of hiring accountants right now in the Philippines, it's actually booming. It's more cost-effective and, at the same time, firms can get good talent from the Filipino market delivering the same value as their onshore hires.”
“So I think the talent market is very hot right now, and the need for outsourced accountants and bookkeepers is also something that's booming for most clients.”
Building your ideal global accounting team is a major goal for many firms. But, deciding whether to opt for direct hiring as an Employer of Record (EOR) or partnering with a BPO provider is a major consideration for your hiring strategy.
All in all, it’s down to what’s right for your firm, your budget, and the roles you’re hiring for. But it pays to understand the pros and cons of an EOR vs a BPO strategy.
Business Process Outsourcing (BPO) provides you with contractors but does so through a third-party agency, with a manager acting as the direct contact with your firm.
Following the BPO route can be a short-term strategy for finding the talent your firm needs. But hiring via a BPO provider isn’t the ideal longer-term solution. A more stable and rewarding strategy can be to hire staff directly via EOR, using a provider like TeamUp.
Being an Employer Of Record (EOR) is an alternative option, where instead of working with contractors through a provider, you hire them directly. This has many advantages, but as Lalaine explains, direct hiring requires a higher outlay due to the contributions that most independent contractors will need to pay.
“Contractors that are working for a BPO provider, or salaried employees working under Philippines regulations, will have access to additional benefits. For example, benefits like the traditional 13th-month pay and their government contributions.”
“But for independent contractors through an EOR, most of the time, they’ll need to cater for those contributions and other local government contributions themselves. That's why the salary range for an independent contractor bookkeeper is typically higher compared to those in a BPO or those under Philippine regulations.”
Paying competitive salary levels to your direct hires allows these contractors to cover their contributions from their own wages. But paying higher wages as an EOR can also significantly improve your staff retention, the quality of your talent, and the longer-term rewards to your independent contractors.
For example:
Making sure you're offering competitive salary levels is an essential part of getting the most from direct hiring. Knowing what to pay your Filipino staff is critical and means having a close understanding of the going rates across all roles and positions.
According to benchmark salary data from talent.com:
So, how does this compare with the going market rates for direct hires?
As the Recruitment Lead at TeamUp, Lalaine knows the current offshoring pay range in the Philippines like the back of her hand. So, we asked her to outline average monthly salary ranges for a cross-section of different accounting roles, beginning with the basic bookkeeping positions that can make such a difference as part of your firm’s offshoring strategy.
“Right now, for independent contractors, bookkeepers would range between Php 50,000 to 100,000 ($891 to $1,782 USD, or $1,372 to $2,744 AUD), and that varies depending on the level of experience.”
For direct hires, we advise the following salary figures:
Pay rates will vary depending on the experience required for the role and the type of tax work that’s being carried out.
With tax accountants, pay varies depending on their experience and whether the work will be for Australian tax accounting or US tax accounting. But, typically, US tax accountants have higher pay compared to Australian tax accountants.
According to benchmark salary data from talent.com:
For direct hires, we advise the following salary figures for US tax work:
We advise the following figures for Australian tax work:
With the experience and seniority of these senior employees comes a higher price tag to include in your hiring budget.
According to benchmark salary data from glassdoor.com:
For direct hires, we advise the following salary figures:
An important consideration when working with overseas talent is the differences in culture and the potential impact on traditional pay structures.
Whereas your US or Australian firm may be used to working to a 12-month pay process, in the Philippines, there’s the tradition of ‘13th-month pay’ for most employees – a consideration that’s important to factor into your pay strategy and hiring budget.
The 13th-month pay bonus is an end-of-year bonus that’s mandated by Philippine law for all employees and contractors. As such, it’s not a discretionary payment but a cultural norm that workers will expect to receive (and may feel short-changed if they don’t), as Lalaine explains:
“We highly encourage all of our clients to provide the 13th-month pay as a benefit. That's because it's a common thing in Filipino culture. It's a mandated benefit that Filipino employers must pay to their employees and contractors, of course. But if contractors are offered a 13-month pay by an international client, they will definitely feel that they’re valued.”
“It's not only a bonus for these candidates. At the same time, it serves as a retention bonus. If a hire is anticipating a bonus by December, they’ll be waiting for that payment. If they don’t receive it, that could cause them to leave the company. So definitely, it's also a retention bonus for these clients and a way to hang onto talent.”
Attracting the right employees or independent contractors and then retaining that talent in the firm is a vital element in your offshoring strategy. Offering competitive pay and salaries is one thing, but it’s also good practice to factor in annual salary increases and bonuses for your high performers.
A median salary increase of around 5% would be the customary salary increment in the Philippines, with frequent salary increments being a good way to drive performance and keep direct hires in the team.
With annual bonuses, you should budget for between 6-10% of annual pay for strong performers who meet their targets and deliver the high performance you’re looking for.
So, as an example, for an average senior accountant salary, you may be looking at an end-of-year bonus of approximately Php 120,000.
Average Salary = Php 1,200,000 x 10% bonus = Php 120,000 ($2,144 USD or $3,289 AUD)
Calculating bonus payments is a major part of understanding your budget when taking on offshore contractors. It’s vital to work these bonus figures into your calculations at an early stage, so you have a realistic overview of your offshoring costs from the get-go.
For example, you might have a senior accountant contractor who’s performed exceptionally over the year, so your total spend for this direct hire may work out as follows:
Paying a competitive base salary, bonuses, and 13th-month pay may seem like a significant outlay. But this is an investment in finding the best staff, retaining talent, and providing stability and excellence for your accounting function.
Good compensation and benefits add considerable value and set you out as a firm that direct hires will want to seek out.
In a market where Filipino accountants have considerable choice around the firms they work for, it’s important to sweeten the deal and offer benefits and compensation that set your firm apart from other competitor firms in the market.
Offering work through an EOR arrangement gives the opportunity to increase the benefits you offer and offer better base salaries – options that add value in the eyes of the contractor and help you to attract and retain the best possible Filipino accounting talent.
As Lalaine outlines, some benefits will be valued more highly than others by independent contractors, but it’s sensible to offer a wide mix of compensation options.
“The most attractive benefits for contractors; number one would be 13-month pay. Number two is providing paid time off or leave credits. That's because some clients don't provide paid time off as standard and believe it should only be offered to an actual employee.”
“Contractors definitely feel valued when they have paid time off, and at the same time, it doesn’t negatively affect their pay. They’ll have the time to rest, carry out errands, or attend family vacations, family events, or personal events. So those are the two things that are most attractive for independent contractors.”
Looking after your staff is an important commitment as an employer. Healthcare plans, dental plans, life insurance, etc, will all be optional benefits for employees on your payroll.
By hiring your accountants and bookkeepers directly, through an EOR arrangement, you have the option to offer them the kinds of health insurance and benefits that are usually reserved for salaried employees.
This offers:
Conversely, contractors that are provided through a BPO provider won’t generally have access to additional benefits such as healthcare. Independent contractors will usually be expected to make their own arrangements regarding healthcare.
So, offering additional healthcare benefits as an EOR can be a great incentive to work for your firm and will make your direct hires feel valued and more secure as contractors.
Superannuation, pension plans, and retirement provisions are offered to your salaried employees as standard. These plans offer financial security and peace of mind to employees regarding their own retirement plans, so offering super/pension contributions can be a big draw for contractors.
As with healthcare, prospective hires see great value in having retirement provisions in place and pension plans can be an excellent tool for positioning your firm as an attractive employer.
Your staff will want the option to expand their professional skills, whether they’re employees or contractors. Offering professional development opportunities, training, and access to courses for your direct hires can be a major benefit.
It’s also a double-edged sword, as contractors who receive regular training will be more up-to-date with the latest legislation, tax law, and accounting best practices.
Since the pandemic, remote working has become a much-valued perk for both employees and contractors. Whereas many BPO contractors will be expected to work from a designated office, independent contractors place great value on being offered flexible working arrangements, where they can work from home and enjoy all the traditional Filipino holidays.
To position your firm as an attractive place to work, consider:
According to the Australian Financial Review, accounting firms are saving as much as $47,000 per employee by using offshore labor that is 25% to 50% cheaper than in Australia.
Savings to your firm’s annual employment costs could be even more pronounced, depending on the type of role your firm is hiring for. For example, based on current figures from talent.com, average annual salaries for a standard bookkeeper role in the Philippines could be significantly lower than in the US or Australia – even once you’ve factored in additional expenses like 13th-month pay and bonuses.
For example:
As we’ve seen, the benefits of hiring Filipino accounting contractors aren’t just in the cost-savings. What you have is access to a pool of professional accounting staff who are well-trained, ambitious, and eager to work with overseas clients.
Expanding your firm’s capabilities with an offshoring strategy is one of the key solutions to the ongoing talent shortage in the global accounting industry.
But to attract the best talent and retain the most valuable people, it’s critical to apply the learnings that we’ve highlighted in this article.
To keep turnover to a minimum:
Offering the best starting salary and benefits is a crucial part of your firm’s offshoring strategy. That’s a learning that Lalaine is keen for firms to take on board when working with direct hires.
“Providing benefits, like the 13th-month pay, paid time off, a good maximum salary, and excellent annual salary increments, is so important. If you also add things like healthcare insurance, that will definitely increase morale and attract great candidates to the opportunities you're offering.
“Your direct hires won’t feel like an independent contractor but more like an actual employee. So, it’s very important that you provide competitive benefits aside from a competitive base salary.”
Making your accountants and bookkeepers feel valued, well-compensated, and respected gives you a solid foundation on which to build your offshoring strategy.
If your firm is looking to hire, schedule a call to talk through your firm’s offshoring needs.
Hire top accountants in The Philippines with TeamUp DirectHire.
