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).

The Philippines: An Evolving Market For Accounting Talent

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.”

Paying The Best Market Rate For Accounting Talent

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:

  • BPO hires may be cheaper to engage – according to the recruitment site, Indeed, the average BPO monthly salary for accounting staff ranges from approximately Php 16,634 per month for an accounting clerk to Php 73,843 per month for a tax accountant (approximately $297 to $1,320 USD, or $456 to $2,026 AUD per month).
  • Direct hiring requires greater outlay – a direct hiring strategy will mean paying higher salaries to your new Filipino employees. On average, with direct hiring, you would be looking at approximately Php 20,000 for an admin clerk up to Php 90,000 for a standard tax accountant (approximately $357 to $,1608 USD, or $549 to $2,469 AUD per month).
  • BPO providers don’t offer the best pay or conditions – BPOs are notorious for paying below-market rates and having poor working conditions, which often leads to poor staff turnover. If your firm hires directly and pays slightly above market rates, you’ll often be rewarded with loyal team members who stick around for a long time.  
  • Direct hiring offers increased talent stability – higher salaries for direct hires can help to attract quality accounting talent to your firm. A higher base salary will also reduce your staff attrition rates and support the retention of the best staff in the business. These are all significant benefits when running an offshore function.

Average Pay Rates for Filipino Bookkeepers

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:

  • The average annual salary for a bookkeeper is Php 420,000 (approximately $7,506 USD or $11,521 AUD)
  • The average salary range for a bookkeeper role goes from Php 360,000 to Php 720,000 (approximately $6432 to $12,864 USD, or $9,874 to $19,748 AUD)
  • The average monthly pay is Php 35,000 (approximately $625 USD or $960 AUD) 

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:

  • Entry-level bookkeepers typically have between one and three years of experience. We suggest clients follow PHP 50,000 to 70,000 per month ($891 USD to $1,247 USD, or $1,372 to $1,921 AUD )
  • For mid-range bookkeepers with around three to five years of experience, we suggest Php 70,000 to 90,000 per month ($1,247 USD to $1,604 USD, or $1,921 to $2,470 AUD)
  • For higher-level bookkeepers with five or more years of experience, we encourage clients to offer between 90,000 to 110,000 Philippine pesos ($1,604 USD to $1,960 USD, or $2,470 to $3,018 AUD)

Average Pay Rates for Filipino Tax Accountants

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:

  • The average annual salary for a tax accountant is Php 600,000 (approximately $10,721 USD or $16,464 AUD)
  • The average salary range for a tax accountant role goes from Php 390,000 to Php 900,000 (approximately $6,969 to $16,079 USD, or $10,702 to $24,697 AUD)
  • The average monthly pay is: Php 55,000 (approximately $983 USD, or $1,509 AUD) 

For direct hires, we advise the following salary figures for US tax work:

  • For entry-level US tax accountants with one to three years of experience, the pay would range between Php 60,000 to 90,000 ($1,069 to $1,604 USD, or $1,645 to $2,468 AUD)  
  • For the mid-range US tax accountants, with three to five years of experience, typically that would range from Php 90,000 to 120,000 ($1,604 USD to $2,138 USD, or $2,468 to $3,291 AUD)
  • For higher-level US tax accountants with five years of experience, typically, it would be Php 120,000 to 160,000 ($2,138 USD to $2,851 USD, or $3,291 to $4,388 AUD).

We advise the following figures for Australian tax work:

  • For entry-level Australian tax accountants, usually, the pay would be between 60,000 to 80,000 pesos ($1069 USD to $1,426 USD, or $1,645 to $2,193 AUD)
  • For the mid-range Australian tax accountants, it’s usually between 80,000 to 100,000 pesos ($1,426 USD to $1,782, or $2,193 to $2,741 AUD)
  • For higher-level Australian tax accountants, an average would be 100,000 to 130,000 pesos ($1,782 USD to $2,317 USD, or $2,741 to $3,564 AUD).

Average Pay Rates for Filipino Senior Accountants 

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:

  • The average annual salary for a senior accountant is: Php 1,200,000 (approximately $21,445 USD, or $32,876 AUD)
  • The average salary range for a senior accountant role goes from Php 780,000 to 1,680,000 (approximately $13940 to $30,024 USD, or $21,370 to $46,028 AUD)
  • The average monthly pay is: Php 100,000 ($1787 USD to $2740 AUD)

For direct hires, we advise the following salary figures:

  • For entry-level senior accountants with less than three years of experience, pay rates would range between Php 60,000 to 70,000 ($1,069 to $1,247 USD, or $1,637 to $1,909 AUD)
  • For the mid-range senior accountants with three to five years of experience, that would range from 70,000 to 100,000 pesos ($1,247 USD to $1,782 USD, or $1,909 to $2,728 AUD)
  • For higher-level senior accountants with five years of experience, that would be 100,000 to 120,000 pesos ($1,782 USD to $2,138 USD, or $2,727 to $3,272 AUD) 

13th Month Pay And Why It’s Important

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.”

The Value Of Annual Salary Increases And Bonuses

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:

  • Annual Salary = Php 1,200,000
  • Performance bonus at 10% = Php 120,000
  • 13th-month pay = Php 100,000
  • Total reward = Php 1,420,000 ($25,371 USD, or $38, 764 AUD)

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. 

Additional Compensation Factors To Consider 

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.”

Health Insurance and Benefits

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:

  • The stability of healthcare contributions and membership in a medical insurance plan
  • Reduced worry around doctors’ bills and medical costs for the direct hire
  • Confidence in your firm as an employer, from the perspective of your direct hires

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. 

Retirement Plans and Contributions

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.

  • Independent BPO contractors would need to make their own pension arrangement and pay the contributions from their own salary – a cost that most will not relish.
  • Direct hires with pension provisions will have their contributions paid directly by the EOR, providing a welcome retirement benefit that doesn’t impact on take-home pay.

Professional Development Opportunities

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. 

Flexible Working Environment 

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:

  • Offering remote working, so your direct hires can work from home and have the flexibility of this working arrangement.
  • Don’t require your direct hires to work from, or visit, a designated office, allowing your remote employees to remove the need for a commute.
  • Save hours of travel and commuting time for your hires - a major bonus given the reduced travel options available in the Philippines since the pandemic.
  • Cut down on your remote employees’ regular travel expenses, decreasing their overall costs and making their wages go further.
  • Respect the traditional holidays in the Philippines, so your remote employees have time to celebrate with family and feel respected as members of your team.

Average Offshore Hiring Cost Savings

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:

  • Average bookkeeper salary in the United States = $44,030 USD
  • Average bookkeeper salary in Australia = $76,076
  • Average bookkeeper salary in the Philippines = Php 420,000 (approximately $7,506 USD or $11,521 AUD)

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. 

How To Avoid High Team Churn 

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:

  • Offer competitive pay that’s in line with current market rates
  • Be sure to include 13th-month pay for everyone on your team
  • Offer additional benefits and bonuses as performance incentives
  • Allow for flexible working, including remote working and flexible hours
  • Honor traditional Filipino holidays so your team can take paid time off
  • Offer training and professional development to your team
  • Review pay and reward packages regularly to keep pace with the market
  • Make sure you’re creating a great company culture where everyone feels part of the team, even when working remotely from overseas.

Offshoring: A Cost-Effective Solution To The Talent Shortage

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.

Written By
Isaac Smith
Isaac has been building businesses since 2014. He sold an eCommerce business in 2019, co-founded Summit eCommerce Advisors - a bookkeeping and advisory firm, TeamUp - a recruiting business, and hosts the Next Level eCommerce podcast. He lives in the Portland, Oregon area, where he loves snowboarding with his daughter and trying to convince his wife to do outdoorsy things.
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