So, you are looking to hire and you heard outsourcing in the Philippines is a great way to expand, save money, and increase capacity.
However, you are overwhelmed with all of the options.
The most common routes accounting firm owners take in our experience is to hire direct using a recruiting service, like TeamUp, go through a BPO, or to DIY it through Upwork. Each has advantages and drawbacks.
In this article, we’re going to explain in detail the specific pros and cons of direct hiring vs using a BPO.
BPO stands for Business Process Outsourcing, and these are businesses - usually located overseas - that hire staff locally and then contract them through you. They're also commonly referred to as outsourcing companies.
If your accounting firm wants to hire five new bookkeepers to handle tax, you may hire a BPO for a monthly fee, and they'll put these staff members on their payroll.
Think of a BPO as a big company in the Philippines with its own offices and staff, except the staff isn’t doing work for the BPO – they’re working for overseas clients like you.
A BPO will typically handle staff performance, technology, payroll, and admin, and they usually have an office where people commute to. There they provide laptops, desks, management, training, and everything that staff need to do their work.
Depending on the BPO, you may have more or less a direct connection with the actual staff doing work.
Hiring direct, on the other hand, is getting a remote Filipino bookkeeper to work directly for your company without the middleman.
We’re going to dive into all of the pros and cons of working with a BPO in detail, but first here is a quick summary.
One of the biggest reasons people go through BPOs instead of hiring direct is to bring staff on board and have all the management, compliance, and logistics taken care of.
Unlike when you’re hiring direct, a good BPO will take care of all the operational, compliance, and legal requirements of having an overseas employee.
Outsourcing through a BPO is like staying at an all-inclusive resort. With an all-inclusive resort, you pay one fee, and everything is taken care of, including your hotel, food, and drinks. A BPO works similarly. You pay a labyrinth of fees, and it’s supposed to be hands-off. Not only are your employee’s HR, IT, legal, and training needs taken care of, but their performance and operations are managed for you.
All you need to do is request the work that’s required.
It also means that you are essentially “renting” your team members through the BPO. Just like at an all-inclusive resort, you can keep using all of these benefits as long as you keep paying. The minute you stop paying or realize that you don’t need the “BPO” anymore, is when problems can arise. But more on that later in this guide.
BPOs act as an intermediary layer of management between you and your employees, providing more or less oversight depending on the specific BPO partner you choose and your specific requirements.
They’ll also assign an account manager or operations manager to watch your staff's attendance, KPIs, or other metrics.
They monitor performance issues - including dismissing and replacing underperforming employees.
BPOs also provide job-specific training and may give staff software training, training on your company’s policies and procedures, product or service knowledge, and even soft skills training.
For example, your accounting firm decides to outsource part of its tax preparation and bookkeeping tasks.
Prior to commencing work, the BPO provides the outsourced staff with specialized training on U.S. tax laws and accounting standards, making sure they’re familiar with your firm's specific software tools and internal processes. They give ongoing training sessions on soft skills to improve client interaction and service delivery.
Another important factor is that the BPO will simplify legal and contractual processes, including compliance with employment laws in the Philippines.
A traditional BPO covers the following:
Depending on the sector of the BPO services, there might be additional regulatory compliances to adhere to, such as those related to financial services, healthcare, or telecommunications.
Handling all compliance-related functions is a big selling point (and money-maker) for BPOs and they tend to emphasize it in their sales process. Depending on your risk profile, current team structure, and many other business factors, it could be a great solution for you.
However, handling compliance-related tasks is often less time-consuming and daunting as the BPOs make it seem. There are more affordable options, like using an Employer of Record service (more on this below) to take care of legal compliance for you. However, with a BPO, this service is already built in.
BPOs come with some major cons that hiring direct doesn't have.
Relying heavily on a BPO provider for critical business functions creates dependencies and makes you vulnerable to disruptions in their operations.
For starters, it is the BPO’s team, NOT yours. You are basically renting team members from them. In effect, when you work with a BPO, you’re building your business on someone else’s land.
This means that they can move a staff member from one account to another. And if the BPO provider faces problems, such as staffing issues, technical difficulties, or even financial troubles, it could disrupt your business operations.
You might find yourself unable to deliver services to your clients on time, which could harm your reputation and lead to financial losses.
Taking the risk of using staff beholden to another company is something you need to carefully consider.
Many BPOs have restrictive contracts with both their clients and their staff. And you are not allowed to see the contract they have with staff. These staff contracts have scary financial and legal penalties for leaving the BPO and going to work for you. It even restricts their future career growth because they have to sign a non-compete that often lasts for 2 years.
As for the contract you sign with a BPO, there are also heavy exit clauses that tie your team into a contract with the BPO for a certain period. You also won’t be able to carry on working independently with your BPO staff - they’re employed by the BPO, not you.
This means that either you're locked in with your BPO or you have to go through the recruitment and training process again to replace what they were doing.
You can choose to take the BPO to court, but these legal procedures can cost tens of thousands of dollars and be lengthy. The BPO could even initiate a lawsuit for breach of contract, seeking damages or enforcement of the contract terms.
Ultimately, rebuilding your team may be the more time-consuming and less expensive option.
Unlike with hiring direct, there’s a management layer between you and your employee. This further reinforces that you are renting employees from a BPOs, and that is not your team.
That makes it hard to build a company culture. The BPO has its own culture and policies and it is likely very different from the culture of your firm. For instance, BPOs require staff to commute into their offices and may not have perks like flexible hours. BPO salaries are also lower than what someone would get working directly for an accounting firm.
If you want to do something nice like give a bonus to a team member, who is delivering great work, you need to get permission from the BPO. This puts the BPO in a tough spot because if one person on the team is getting extra money and time off by their client and the team member sitting right next to them isn’t getting those same opportunities, it can create conflicts. So oftentimes, BPOs don’t allow bonuses at all or they just pocket the money and your team member doesn’t see any of it.
At best, having two different company cultures leads to confusion among the team. At worst, this leads to higher team turnover, low employee morale, and more headaches for both your accounting firm and the BPO.
Unlike hiring directly where this is a one-time fee charged upfront, BPOs charge a labyrinth of ongoing fees for a variety of functions despite most of their value being delivered on front in the form of hiring, training and compliance.
Here’s a running list of just some of the fees the typical BPO charges:
All of these fees mean you are essentially funding the BPO’s team culture often at the expense of your company's culture. Your outsourced team will be more aligned with the BPO's values, work styles, and priorities rather than those of your company.
Plus, your monthly payment to them has diminishing returns over time. While the BPO might have been very useful in the beginning, it becomes unnecessary later when you don’t need the level of management, training, or support they provide.
BPOs are notorious for high employee turnover due to restrictive corporate policies, poor employee morale, and lots of office politics. This means the best employees don’t want to work for some BPOs and in a global workforce, they don’t need to anymore.
For one, commute times in the Philippines can be extremely long – sometimes up to 4 hours. Many employees may see this as a big reason to seek remote work opportunities instead.
Secondly, the salaries paid by BPOs might be lower than that of a bookkeeper who works directly for an international company.
Third, BPO employees are asked to sign non-compete agreements, which impact their future careers.
Finally, many BPO employees aren’t treated like responsible and professional adults. They have to go through security scans, can’t have their phone at their desk, and have to abide by strict clock-in and clock-out policies.
If your business is experiencing fast growth or seasonal demand spikes, BPOs can quickly scale operations up or down. This offers a flexibility that's hard to match through direct hiring.
If your company is thin on administration or operations, it could be best to go through a company that can handle that aspect for you.
So, how do you decide whether a BPO is the right move for your accounting firm?
Here are some additional considerations to think about.
First of all, it’s important to ask yourself what you actually need a BPO for.
Another aspect to think about is how you will treat your onshore vs offshore staff.
Some BPOs encourage an offshore and onshore culture where there are more advantages for the onshore team. The offshore team may not be invited to team meetups or talk with clients.
At TeamUp, we recommend that accounting firms use a global, unified team approach, where you've got team members around the world, and everyone receives the same treatment.
All team members are part of team-building activities and are assessed using the same performance evaluation. You also involve all team members in decision-making processes and provide them with the same training opportunities.
Another consideration is salary. With BPOs, your employee is only getting a portion of the salary you pay to the BPO every month - with a chunk of it going to the BPO for all of the related fees.
BPOs typically operate under one of the following operational models.
With transactional/task-based BPOs, you outsource specific tasks or processes to them on a per-transaction or per-task basis. For example, data entry, customer support, or invoice processing.
With a full-service BPO, you outsource an entire business function to them, for instance, all your client’s taxes. The BPO provider takes responsibility for managing the entire process, from start to finish.
There are also build-operate-transfer models and managed services, but these may not be as common for accounting firms.
With any of these models, it’s important to think about how this will affect your firm’s existing workflow and practices. You might need to adjust your processes to work with the BPO, like using different software or following different procedures.
Staff Fluctuations
Because a BPO takes care of management, they’re allowed to swap staff in and out based on factors like project requirements, skill sets needed, workload fluctuations, employee availability, and performance evaluations.
As you can imagine, this could impact the quality of work you receive as well as overall staff productivity.
Frequent changes in the team can lead to inconsistencies in the quality and style of work. Each new team member may have different levels of understanding of the project's requirements, potentially leading to variability in the output that can affect the overall quality of service.
Every time a new employee is swapped in, there needs to be a period of knowledge transfer. If staff changes are frequent, significant time and resources may be spent on continuously training new BPO staff instead of progressing with the work. This can slow down project timelines and increase the risk of errors.
Hiring direct means you’ll handle the entire recruitment process yourself. This doesn’t have to be a time-consuming process if you use a specialist recruiting company like TeamUp to help you hire top talent.
At TeamUp, we help US, Canadian and Australian accounting firms recruit top-tier accountants, bookkeepers, and admin staff in the Philippines without ongoing fees.
MIn fact, many people hire direct and hire them as an independent contractor. Other accounting firms prefer to use an Employer of Record (EOR)EOR so their team member is classified as a local employee. The EOR will handle all HR, benefits and compliance aspects on your behalf.
Hiring employees directly offers several advantages, especially in terms of integrating the team, aligning with company culture, and managing operations closely.
We’re going to dive into all of the pros and cons of hiring direct, through a service like TeamUp, in detail, but first here is a quick summary.
As mentioned earlier in this post, many ambitious and top-performing accountants don’t want to work for a BPO. They want to work with a firm that aligns with their goals and values. For the same reasons you want to hire people directly, they also want to work with you directly. By offering a remote accounting position in your firm, you’ll have access to that talent.
You’ll also be able to bring people on board who more directly match your cultural values, as opposed to someone who fits in with the BPO’s work culture.
For instance, let’s take an accounting team lead who has 6 years of experience working with global accounting firms. One day, she may decide to only work remote positions moving forward because she is tired of commuting 43 hours each day, never seeing her kids, and being treated like a child by the BPO she used to work for. She has all of the skills and attributes that your firm is looking for. By the simple fact that you are willing to give her a remote, work-from-home position with more responsibility and skill advancement opportunities in her role means she’ll likely choose to work with you and be very loyal to the company.
By directly hiring team members instead of utilizing a BPO, you maintain complete control over the company's culture and ensure that each team member aligns with your organizational values. This adds to a more unified, global team environment.
Culture fit is essential both for team unity as well as for client/account management. Direct-hires are more likely to feel like they’re part of the same team when everyone is using the same processes and being evaluated the same way.
With a team member that you’ve hired directly, you’re bringing someone on board who’s directly aligned with your culture, rather than a BPO’s.
Hiring directly places you in the driver's seat, allowing you to shape the team's structure, define roles, and set expectations clearly from the start.
Unlike with a BPO, you monitor your team member’s performance and are directly involved in their day-to-day activities. You can work with them on their career development and growth path, and you don’t need to go through a third party for things like bonuses or vacation policies.
Any decisions you make in order to improve your team’s wellbeing or alter the equipment or software they use are yours to make - not the BPOs.
Unlike with BPOs, you can design and adjust the team setup and processes as needed. For instance, you can use a project management system of your choosing and select the communication channels everyone will use, reporting, and team structure.
You won’t need to go through a third party to request a change in how you do things. This makes it much easier to tailor your employee’s workflow to the unique needs of your clients, projects, and company objectives.
When you hire directly through a company like TeamUp, your only fee is an initial recruitment fee. With a BPO, you pay ongoing monthly fees forever - and they end up being much higher than paying an initial recruitment fee.
TeamUp’s pricing model is simple and straightforward, with a one-time fee of $4,000 USD.
Beyond the recruitment fee, your primary ongoing cost depends on whether you’re hiring through an EOR or as an independent contractor.
With BPOs, a role is typically marked up 40% to 60% annually in salary and benefits when you consider the ongoing fees you’re paying.
Training is usually included in a BPO’s monthly fees. However, they train staff in a way that fits their team culture, not necessarily yours.
BPO training methods may be more traditional, while your team culture, for example, could follow the radical candor philosophy. Having staff members trained using a method different or even contradictory to yours could cause confusion and misalignment.
Not to mention, if team members follow different methodologies, the way they carry out tasks and projects can vary significantly - this can cause frustration, an uneven quality of work, and difficulty communicating with fellow team members and clients.
For example, when the U.S. team suggests customizing financial reports to provide deeper insights for a specific client, the BPO team struggles to deviate from their standard reporting format, citing their training and protocols.
You eliminate all of this confusion when you hire direct and assume full responsibility over training. This means that every team member, regardless of location, receives the same training.
Direct hiring is attractive for its potential to closely align team members with your company's culture and goals. However, it comes with some drawbacks to consider:
There is a lot of nuance in this topic and every accounting firm's situation will look different.
However, as a general observation, BPOs use compliance as a primary selling point. So, they often make it seem more complicated than it is and like their solution is the only option. When in reality, there are a lot of viable compliance approaches you can take like hiring an Employer of Record or doing it in-house. Both of which tend to be more affordable than a BPO.
As part of this, you also need to consider candidate preferences regarding compliance and how this can impact both recruitment and retention. For instance, most top talent don't want to work for BPOs since they value autonomy, flexibility, and job security.
When you hire directly, you handle the full spectrum of managing that person. This means not just the recruitment process but also the training, mentoring, performance management, and career development.
Direct hires require a commitment to developing their skills and integrating them into the company culture. You’ll want to make sure you allocate enough time and resources to this, especially in the beginning
Some of the duties of managing an accounting team in-house include:
Hiring direct requires more administrative work upfront, but it can be a valuable investment in creating a team that's truly yours.
This means making sure you can manage and welcome new team members properly, and thinking about how this will help your business in the long run.
An important first step is to evaluate your company’s capacity to manage and train new direct hires.
Will your team members be on board to help train your new staff member/s?
It’s important that you set expectations and make sure everyone is aligned and committed.
If you haven’t already, develop systems for their workflow, and think about how you’re going to communicate.
This doesn’t have to be as intimidating as it sounds. Succinctly, you will need to:
Finding the right balance between skills and attitude is important. Key traits to consider include:
While technical skills are crucial, a candidate's ability to integrate into the company culture and work well within the team is even more important.
If someone doesn’t have training in a particular area, it’s possible to bring them on board and teach them. It’s more difficult to work with a team member who may have all the necessary qualifications but is unwilling to adapt to your processes.
Now that you're more familiar with BPOs and direct hiring, grasping the benefits, drawbacks, and overall effects will help you make an informed decision for your business. Here are the key points:
When you go with a BPO, you're partnering with experts to handle certain tasks or processes outside your company.
However, your team members will also be ‘theirs.’
Hiring direct, on the other hand, means bringing people into your team to work closely with everyone and fully immerse in your company's culture and mission.
A direct hire will require an upfront recruiting fee, but this will be a one-off cost. It's an investment in building your team's capabilities and culture - and you retain full control over your company culture and team. It's about investing in people who will contribute to your company's success and culture in a deep, lasting way.
Choosing between BPOs and a direct hire isn't just about the numbers; it's about what you envision for your company's future and how you want to build toward that vision.
Consider your needs, long-term goals, and the kind of team you want to cultivate. Both paths offer unique benefits, and the right choice depends on your strategy, budget, and where you see your company heading.
If you want to learn more or need help deciding which path is right for your accounting firm, you can schedule a free call with us.
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