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General

The Philippines is an archipelago of over 7,000 islands located in Southeast Asia.  It has a population of 94 million, and English is the common language of business due to American ties and multiple local languages.  Although its GDP has grown at an average rate of 7.3% in 2010, its actual economy is smaller than other countries in ASEAN.  In 2010, the Philippines’ GDP was $189 billion, significantly lower than Thailand’s $587 billion or Malaysia’s $238 billion.

According to the National Statistics Office, the country’s workforce numbered 39.7 million in April 2011.  The unemployment rate hovers around 7.2%, a slight decrease over the past few years.  Poverty is a major problem, with about 40% of the population living on less than $2 a day.

Wages and Compensation

The minimum wage varies by region as well as by industry in the Philippines, controlled by “wage boards” for each region.  Currently, in the National Capital Region (i.e., greater Manila), it is set at 426 pesos in non-agricultural work, or about $10.09 per day.  It has decreased 36 pesos since 2007.  There is poor enforcement of existing minimum wage laws.

Companies are mandated by law to give bonuses, also known as the 13^th Month Pay before December 24^th of each year. The bonus must equal at least one month’s salary.

Other Benefits

The Philippine government has several programs which take mandatory contributions as a proportion of employee pay. The principal one is Social Security, which takes contributions of 10.4% of monthly salary. About two-thirds of that is contributed by the employer, the rest by the employee.  The government is currently considering increasing the mandatory contribution to 11%.

There is also a National Health Insurance program, which pays some medical expenses.  It is commonly referred to as Philhealth.  Contribution levels stand at 2.5% of salary, half from the employee and half from the employer.  As for maternity leave, employers must give employees 60-78 days of leave, depending on the type of birth.

In 2009, the Philippine government implemented the Home Development and Mutual Fund, which provides funds for housing programs.  Employees contribute 1% of their monthly salary if they earn under $1,500 pesos per month ($35/month) and 2% if they earn more than $1,500 pesos per month.  Employers contribute 2% of each employee’s monthly salary.

Labor relations

Unionization and labor action have dwindled in the Philippines over this decade.  According to the Department of Labor and Employment (DOLE), about 5.5% of the Filipino workforce was unionized in 2010, down from 5.9% in 2005 and 14% in 1995.  In addition, the country’s major labor groups signed a Social Accord with employers in 2004, pledging to work together and minimize strikes.  Strikes have steadily declined, with only 4 in 2009 and 8 in 2010.

BPO in the Philippines

In recent years in the Philippines, the offshore services industry has expanded greatly. In particular, business process outsourcing (BPO) services like call centers, medical transcription, software development, etc. have thrived. Companies like AOL, Citibank, and Barnes & Noble have built large service centers in the country. According to the Commission on Information and Communications Technology, about 525,000 Filipinos were employed in such fields in 2010, an increase of 110% over 2006. This sector has helped drive the country’s economic growth.  Currently, the government is striving to encourage more jobs in the information and communications field.  Their aim is to have one million jobs by 2016.

However, HR managers can still have trouble in recruiting qualified personnel for BPO operations.  The official languages of the Philippines are Tagalog and English.  English is one of the national languages and about 50 million people, about half the population, speak it.  Filipinos have the most accent neutral language in the world, meaning that most people from most countries can understand when they speak English.  However, English is spoken almost always as a second language, and actual ability varies.  Call centers and similar businesses currently report having to filter out most job applicants due to insufficient English skills.  Business chambers have called for greater language education and training to counter this problem.

In addition, the Philippines has also had problems with wage levels.  Although absolute wages are not rising excessively, its currency, the peso, has appreciated significantly.  Partly because of this, the country dropped from 7^th to 9^th in A.T. Kearney’s ranking of BPO locations in 2011.

General HR concerns

The Philippines has fairly cheap labor, but not cheap enough to attract significant foreign investment compared to some places like India and Vietnam.  Managerial candidates with experience in the rapidly growing service industries, such as call centers, information technology services, etc. are in high demand compared to those in other sectors.  HR professionals should also be aware that the country has a wide income gap between rich and poor, so top talent needs significantly higher salaries than the basic wage level might suggest.