War for talent? ‘Underground BPOs’ compete for headcount

They pay relatively higher salaries while allowing employees to avail work-from-home (WFH) setups. This was how reports reaching the Philippine Economic Zone Authority (PEZA) define so-called “underground” business process outsourcing (BPO) firms, which were dubbed as such because they were not registered with the government.

In addition, “underground BPOs” reportedly conduct their application processes virtually, thus posing difficulties on the part of government to monitor their recruitment and other activities.

“Nangyayari na po ngayon nakikipag-agawan ang mga underground IT-BPO sa employment. They are offering PHP 30,000 to PHP 40,000 for the IT workers, your honor,” PEZA Director General Charito Plaza told members of the House Ways and Means Committee during a May 16 hearing, citing efforts to appeal for a hybrid work scheme.

As of 2021, registered business enterprises (RBEs) located in PEZA created over 1.01 million jobs, and invested PHP 330.4 billion. During the same year, PEZA has 1,274 IT locator companies operating in 297 IT centers/parks.

“It’s a loss to the government, your honor. And there is no security of tenure. There is no protection to the workers,” Plaza added, “Right now your honor, ang ginagawa po ng BIR (Bureau of Internal Revenue) and BOC (Bureau of Customs) is they are conducting ocular inspections if indeed the IT-BPOs are implementing 100 percent on-site work. This has added pressure and agony to our existing RBEs, your honor.”

This observation was recently concurred by stakeholders from the IT & Business Process Association of the Philippines (IBPAP), some of which were reportedly inspected despite having letters of authority from PEZA to allow up to 30 percent WFH. To recall, the approvals would remain in effect until September 12, 2022, the stipulated end date of the state of calamity in the Philippines by virtue of President Rodrigo Duterte’s Proclamation No. 1218.

“Some of the inspections have caught our locators a little bit off-guard because they hold letters of authority which allow 70 percent (on-site work). Some of the questions posed in some of the reports requested by the inspectors are not consistent with what the LOAs have stated as to (30 percent) WFH. This has caused some confusion,” said IBPAP President and CEO Jack Madrid in an interview last Wednesday.

He also cautioned that the opportunity of up to 60,000 jobs generated per year may be at stake, based on their 2021 data, if the government would continue to implement its “return to office” (RTO) or “back to office” mandate.

“Our role is to increase the number of jobs for Filipinos. I think there is a significant number of demand. There is a war for talent,” Madrid explained, “We are at a very important part of the industry globally. We have an opportunity to seize more market share, but we are losing out the longer we take in addressing this hybrid work setup challenge.”

The IBPAP president noted how the hybrid model “improved” overall productivity and satisfaction during the pandemic without compromising the quality of services provided.

Notably, the trend of preferring WFH to stay even after the pandemic could also be witnessed among other workers in the Asia-Pacific region, as demonstrated by a survey done last March by the International Data Corporation (IDC).

Meanwhile, at least one BPO firm has publicly stated their desire to listen to the WFH plea. Ready to lose their fiscal incentives, Concentrix remained firm in implementing the hybrid work scheme for their employees. According to Concentrix Senior Vice President and Country Manager Amit Jagga, forty-six of their 48 locators in the Philippines are currently registered with PEZA, while two are registered with the Board of Investments (BOI).

“It is critical for us that we think about the staff. That is what Concentrix is doing,” Jagga said in an interview this May with CNN Philippines, “Yes, it is a price to pay. But in the longer term, we feel this is the right decision to take.”

Announcing their intention to open two additional locations with the BOI, which is currently not covered by the RTO mandate, he has also expressed hope for the next administration to look at the matter differently.

On the other hand, the office market anticipates a boost for the rest of 2022 as inquiries have reportedly increased.

“Live requirements for office space are the highest they have ever been in any quarter since Covid-19 took its toll and IT-BPM-friendly spaces are likely to be among the first to benefit from this resurgence,” observed Mikko Barranda, who is Director for Commercial Leasing of Leechiu Property Consultants.

Of the 358,000 square meters of live requirements or ongoing transactions likely to be concluded in the next six months, the recent study by Leechiu Property Consultants found 195,000 square meters would be from IT-BPOs.

“We do see a gradual shift back to office space work,” said MREIT CEO Kevin Tan during the company’s annual meeting last Friday, citing MREIT’s occupancy rate to be at 96 percent.

MREIT is a company designated by Megaworld Corporation to operate as a Real Estate Investment Trust (REIT). It leases a portfolio of ten (10) office and commercial assets to a diversified tenant base across the Philippines.

Then again, how much “underground BPOs” might potentially affect this recovery remains to be seen.

Source: Yugatech