The Philippines has emerged as a global leader in the Business Process Outsourcing (BPO) industry, offering a cost-effective labor market, solid government support, and a favorable business environment. There are over 800 registered Business Process Outsourcing companies in the Philippines, which makes the country a promising opportunity for entrepreneurs and organizations looking to establish their own BPO operations. In this article, we will discuss how to start a BPO company in the Philippines.
What are Business Process Outsourcing companies (BPOs)
Business Process Outsourcing (BPO) involves outsourcing non-core business functions to external service providers. BPO companies provide customer support, IT management, accounting, and data processing services. Each worker has a BPO account, allowing them to manage and handle specific client needs efficiently. BPOs have become popular because they offer cost savings, access to skilled talent, improved efficiency, scalability, and flexibility, making it an ideal choice to start a BPO company in the Philippines.
The BPO industry comprises various branches such as call center services, IT services, accounting services, and data entry services. Call centers are a significant sector within the BPO industry, providing customer support and handling inquiries. IT services offer software development, programming, and technical support. Accounting services include bookkeeping, auditing, tax compliance, and payroll processing. Data entry services involve accurate and high-quality data entry tasks. For foreigners looking to start a BPO company in the Philippines, each sector provides specialized expertise and cost-effective solutions for outsourcing specific functions.
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What are the use cases of BPOs in the Philippines?
Here are some of the important use cases of Business Process Outsourcing (BPO) in the Philippines:
- Quick and effective customer service: BPO providers in the Philippines offer contact center services to provide efficient customer support, including inbound and outbound customer support, multilingual support, complaint management, and order processing.
- Streamline data entry: BPO companies in the Philippines help businesses streamline data entry tasks such as online and offline data entry, document drafting, spreadsheet-based encoding, and database handling.
- Deliver Information Technology-Enabled Services (ITES): BPO vendors in the Philippines offer ITES, including technical support, software development and maintenance, cloud computing services, cybersecurity support, and web and mobile app development.
- Enhance HR procedures: To start a BPO company in the Philippines, BPO services enhance HR procedures, including recruitment and talent acquisition, employee onboarding, payroll and benefits administration, performance management and training, and compliance and legal support.
- Speed up finance and accounting processes: BPO providers in the Philippines specialize in expediting finance and accounting operations, including payment processing, financial analysis, and managing accounts receivable and payable procedures.
- Accelerate non-clinical healthcare services: BPO companies in the Philippines help medical organizations by providing non-clinical healthcare services such as medical coding, claims processing, revenue cycle management, appointment scheduling, and health data analytics.
- Produce and moderate creative content: To start a BPO company in the Philippines, BPO professionals deliver unique creative content, including writing original articles and blog posts, creating visual content like infographics and videos, and moderating user-generated content.
Can foreigners start a BPO in the Philippines?
Foreign entrepreneurs and companies can start a BPO company in the Philippines with government incentives and support. The country has implemented policies to simplify the setup and management of foreign businesses through recognized legal entities. The most commonly used legal entities for BPO companies in the Philippines are as follows:
- Domestic corporation: A common legal entity to start a BPO company in the Philippines requires 70% of income from overseas, 2-15 directors that can be 100% foreign nationals/entities, a Filipino or foreign resident treasurer, a Filipino resident citizen secretary and a minimum capital of $100.
- Representative office: Non-income generating entity serving as liaison office, requires two years of foreign business operations, registration documents, board resolution, a Filipino or foreign resident agent or a domestic corporation with active operations, and $30,000 minimum annual capital.
- Shelf company: A registered entity to start a BPO company in the Philippines, without assets, liabilities, or workforce, ideal for quick establishment, requires registration documents, a Filipino or foreign resident agent, or a domestic corporation with active operations and professional fees to purchase Shelf Company.
- Employer of record: Outsourcing management for remote back-office team, offers recruitment, HR, payroll, tax compliance, and coworking services, requires registration documents, staffing requirements, and professional fees for availing EoR services.
What are the legal requirements for setting up a BPO in the Philippines?
Foreigners looking to start a BPO company in the Philippines must familiarize themselves with the specific BPO requirements in the country. Below are the legal requirements for setting up a BPO in the Philippines.
SEC registration
To start a BPO company in the Philippines, you must register with the Securities and Exchange Commission (SEC). This registration process permits you to conduct business transactions within the country. The process involves submitting an online application, SEC approval, routing documents to signatories, payment, physical submission of hard copies, and releasing the SEC Certificate. It usually takes around 30 working days to complete this registration.
Business permits
Once you have obtained the SEC license, you must apply for a Business Permit from the Local Government Unit (LGU) where your company’s office is located. The LGU issues the business permit or Mayor’s permit, and it is essential to renew it annually. Failure to renew may result in additional charges. Obtaining a business permit involves submitting application forms and documents, inspection, assessment of fees, payment, and permit issuance. It takes approximately 30 working days to complete this process.
BIR registration
Registration with the Bureau of Internal Revenue (BIR) is mandatory to start a BPO company in the Philippines. The BIR is the national taxing authority, and registration should be done with the BIR Revenue District Office, which has jurisdiction over your place of business. This registration enables you to fulfill tax obligations and report future transactions online. The process includes applying for a Taxpayer Identification Number (TIN), securing authorized computation, payment of documentary stamp tax, submission of documentary requirements, acceptance of requirements, and releasing the Certificate of Registration. This process typically takes around 14 working days.
PEZA registration
Registering your BPO company with the Philippine Economic Zone Authority (PEZA) may be advantageous to enjoy certain incentives and benefits, especially for export-oriented. PEZA manages and facilitates foreign investments inside special economic zones by offering incentives such as tax holidays, duty-free importation, and simplified documentation procedures. The PEZA requirements for BPO include submission of application documents, payment of application fees, submission of required documents, receipt of Board Resolution, submission of pre-registration requirements, payment of registration fee, and signing the registration agreement. The PEZA registration process usually takes approximately 21 working days.
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How to start an outsourcing business in the Philippines in 6 steps
Outsourcing to the Philippines has become increasingly popular due to its highly profitable Business Process Outsourcing (BPO) industry. The Philippines has overtaken India as the top offshore BPO destination, making it an ideal location for entrepreneurs looking to start a BPO company in the Philippines. Here is a step-by-step guide on how to start an outsourcing business in the Philippines:
Step 1: Develop a business plan
A project analysis and a comprehensive business plan are essential to start a BPO company in the Philippines. Determine the type of BPO sub-sector you want to focus on, such as customer support, software development, graphic design, or medical transcription.
Step 2: Register your business
Familiarize yourself with the Philippine government agencies involved in business registration, such as the Department of Trade and Industry (DTI), the Securities and Exchange Commission (SEC), and the Bureau of Internal Revenue (BIR). Depending on the structure of your company, you will need to register with the appropriate agency and obtain the necessary permits and identification numbers.
Step 3: Choose your business location and find an office
Select a suitable location for your outsourcing business in the Philippines. Major cities like Metro Manila, Bacolod City, Cebu, and Davao are popular choices to start a BPO company in the Philippines. Consider accessibility, office space requirements, and proximity to potential employees when deciding. Secure a Mayor’s Permit to operate your business in the chosen location.
Step 4: Assemble your team
Recruit key personnel, including managers, human resources personnel, and administrative staff. Define your organizational structure and identify key team members responsible for operations, HR, training, and IT.
Step 5: Process work visas and permits
If you plan to hire foreign professionals to manage your BPO business, secure the necessary work visas for them. Ensure that your business registration and articles of incorporation are in order before starting the visa processing. Be prepared to demonstrate that the foreign national you are hiring will occupy a managerial, executive, technical, or highly confidential position within your company.
Step 6: Train your talents
Once you have assembled your team, provide them with comprehensive training to equip them with the skills needed for their roles. Consult with a training BPO consultant to develop an effective and efficient training program. Emphasize career development and growth opportunities to foster employee engagement and satisfaction.
What are the potential challenges and solutions when starting a BPO in the Philippines?
It can be a viable and profitable venture to start a BPO company in the Philippines. However, entrepreneurs may encounter several potential challenges along the way. Here are five potential challenges and solutions when starting a BPO in the Philippines:
- High employee turnover rate: Implement high-retention strategies like rewards, engagement activities, career growth opportunities, and competitive benefits to reduce turnover rates.
- Difficulty in measuring productivity and performance: Use time-tracking and project management tools to accurately track productivity to start a BPO company in the Philippines, especially for remote or offshore contractors.
- Data security risks: Work with reputable companies, establish non-disclosure agreements, and ensure strong cybersecurity measures to protect sensitive information.
- Customer attrition: Enhance customer experience through exceptional service, proactive communication, and personalized solutions to retain customers and maintain loyalty.
- Shoestring budgets: It refers to carefully managing expenses and finding cost-effective solutions to start a BPO company in the Philippines, particularly in negotiating pricing plans with clients and staying informed about competitors to ensure a mutually beneficial outcome.
Start your BPO company in the Philippines
Starting a Business Process Outsourcing (BPO) company in the Philippines involves navigating complex legal landscapes. Our expert legal team is here to guide you through every step. We offer comprehensive services tailored to BPO company establishment, including analyzing the legal framework specific to BPOs, ensuring regulatory compliance, and aligning your business objectives with legal requirements. Our professionals are skilled in handling various aspects of business setup, from incorporation to operational legalities.
To learn how our legal experts can assist you in starting a BPO company in the Philippines, please provide your details below or reach out to us at [email protected].
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Frequently Asked Questions (FAQs)
How much does it cost to set up a BPO in the Philippines?
The cost to start a BPO company in the Philippines is typically around ₱ 500,000 ($9,000) to ₱ 800,000 ($14,400). However, there are instances where BPOs have been started with as little as ₱ 100,000 ($1,800) to ₱ 200,000 ($3,600).
How long does it take to establish a BPO?
The time it takes to start a BPO company in the Philippines can vary depending on location, business registration process, and setup requirements. Still, it typically takes several months to a year.
Can a BPO buy real estate in the Philippines?
Yes, a BPO can buy real estate in the Philippines, however, there may be certain restrictions or regulations that need to be followed depending on the type of property and the foreign ownership limitations.
Is BPO a private sector?
BPO can be found in both the private and public sectors. However, BPO is commonly associated with the private sector, where companies outsource specific tasks or services to external partners. Therefore, BPO is primarily considered a private-sector practice.
How do I set up a BPO in the Philippines?
To set up a BPO in the Philippines, you must develop a business plan, register your business, choose a location and office space, assemble your team, process work visas and permits, and train your talents.
Can foreigners own BPO in the Philippines?
Yes, foreigners can own BPO companies in the Philippines through various legal entity options such as domestic corporations, representative offices, shelf companies, or employer of record.
