Salary hikes in call centers becoming unsustainable

Mar Roxas: Don’t price the Philippines out of the market

Call centers may have increased their employees’ salaries too much too soon in the last 5 years that the practice may become “unsustainable” despite the the double digit growth that the industry is expected to post this year.

During the Call Center Conference & Expo 2009 in Pasay City, experts said that while industry is expected to post “healthy double digit” growth of 15-20% despite the economic crisis, companies must address the high salary inflation of call center agents.

Benedict Hernandez, president of the Contact Center Association in the Philippines (CCAP), said that salaries of call center agents increased annually by 10 percent, starting in 2004, when the industry experienced rapid growth as the Philippines became a preferred outsourcing destination.

“When you hear 10% year-on-year salary inflation, whether you’re under a global economic crisis or not, that is simply unsustainable,” Hernandez said. He advised companies to instead focus on giving performance-based incentives to their employees.

Speakers at the conference, including Senator Manuel Roxas II, said that high salary rates will make the Philippines a costly outsourcing destination and may turn off potential clients. Currently, the Philippines is among the top 3 leading outsourcing destinations in the world, behind India and Canada.

Biggest BPO Sector

“The creeping cost is not experienced in the rents or the cost of telcos but in the cost of manpower,” said Roxas, who’s considered as the “Father of the BPO Industry” for his policies as trade secretary that prepared the Philippines for the boom in business process outsourcing.

Roxas pointed out that what used to be a starting salary of P10,000 to P12, 000 has now reached P15, 000 to P20,000.

“The challenge for the industry and the country is to not price ourselves out of the market,” Roxas said, adding that there is a need to improve the education system to produce a huge talent pool for the industry and increase recruitment yield.

Contact centers are the biggest sector in the business process outsourcing (BPO) industry, representing about 70% of the industry’s revenues and employment. The industry, Hernandez said, is targeting US$5 billion revenue for this year.

“We are becoming a stronger contributor to the country’s economy,” he said.

Too Many Holidays

Hernandez said that last year the industry incurred additional costs and was severely affected by the declaration of too many holidays in 2008.

“We took a huge hit last year when there were additional holidays that were not within our business plans,” Hernandez said. Companies pay double or more than double during holidays.

Meanwhile, Hernandez said recruitment rate among call center companies rose to 8% from 5%.

“It is a significant increase in our business because we are now able to hire more people from the same applicant pool,” Hernandez said.  “Some of these are benefiting from pre-employment language training provided by the industry.”

Low recruitment yield due to lack of qualified applicants proficient in English has been a perennial problem of the industry. It has pushed some  lawmakers and sectors to support moves to install English as medium of instruction in schools.–Jesus F. Llanto, (Newsbreak)