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The Case for Paying a Living Wage in the BPO Industry

living wage boldr outsourcing

It’s 7:30am on a Friday. 30th of August. Jules just ended her shift at the call center where she has worked the last two years. She makes her way out of the office building towards the closest teller machine. She lines up behind 15 people, all eager to cash out for the month. Long queues at tellers are common during payday weekends.

Her July pay slip is tucked into her purse. In her mind she deducts things from her PHP 16,000.00 (USD 287.30) net take-home pay. Groceries, rent, her son’s college tuition, utilities, her husband’s maintenance medicine. By the time Jules reaches the teller, she realizes that she must withdraw her entire salary to make ends meet.

Jules’ story reflects the reality of over 10.4 million Filipino workers struggling to survive on government mandated minimum wage or less. In the Business Process Outsourcing (BPO) sector, where the majority of entry-level roles approximate minimum wage, the average salary falls short of enabling families with the means to live a dignified life.

The Living Wage: A Pathway to a Dignified Life

The living wage is defined as the minimum income for workers to “afford a decent standard of living” for themselves and their families. Unlike minimum wage, a living wage is higher and factors in the price of essential living expenses, such as “food, housing, education, healthcare, transportation and other essential needs, including provision for unexpected events and emergencies.”

There are various globally recognized methodologies for computing a living wage benchmark. What is consistent across all methodologies is ensuring that basic expenditures are accounted for. Other methodologies such as the MIT Living Wage Indicator establish the living wage as a function of average family size and cost of living in a certain region. For instance, the cost of housing and goods are notably higher in highly-urbanized city centers such as Metro Manila in the Philippines or Cape Town in South Africa than in more provincial areas such as Tacloban or Hazyview, respectively. 

The Anker Methodology accounts for both the difference in living standards between rural and urban contexts, as well as factors in the predominant sectors in these regions, such as whether they are largely agricultural or industrial to build in the costs of production.

With a wealth of reliable and robust studies on how living wage baselines are computed, there remains a lack of willingness among employers to implement this in their own supply chains or payrolls. The living wage is not a legal requirement to operate. For companies seeking to minimize costs while remaining competitive, especially in the service industry, wages are often the main costs that are kept low, much to the detriment of the worker.

Many businesses are apprehensive about how paying a living wage could significantly impact their bottom line and their financial stability. There are concerns that paying a living wage could drive up expenses, which would impact pricing, making them more expensive and less competitive.

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The Business Case for Paying a Living Wage

Contrary to negative perceptions towards the material impact, many global companies such as Unilever, L’Oreal, IKEA, Patagonia, and other notable ethical multinational corporations, have rolled out, and committed to pay, a living wage. As companies opted in to do their workers right through a living wage, studies produced empirical evidence that demonstrate a stronger business and long-term economic case for paying a living wage.

Improving retention and reducing costs associated with turnover, backfilling, and recruitment

A study by the University of Cambridge posits that employees earning a living wage have a higher propensity to stay in a company that enables them to achieve a dignified standard of living. The Living Wage Foundation found that 75 percent of their newly accredited employers experienced notable improvements in employee retention and productivity. Better retention means more return on training and stronger institutional knowledge. 

The BPO industry is notorious for struggling to retain talent amidst prevailingly high turnover rates and have attempted to address this through various incentive schemes. The costs spent on signing bonuses, job boards, and mass recruiters ought to be better allocated towards paying employees a living wage.

Driving up employee engagement and morale, leading to higher quality work

A survey conducted by the National Economic Foundation, found that 80 percent of employers noted that their teams delivered higher quality work after receiving a living wage. A more motivated workforce helps improve attendance and employee satisfaction, which have a strong correlation with overall firm performance, according to the London School of Economics

The case of Fair Trade Outsourcing (FTO) is a strong example of a BPO that reaped the benefits of a more engaged workforce after paying their employees a living wage. BPO workers who worry less about making ends meet are more likely to stay engaged and motivated. Living wage earners who enjoy more economic security are more likely to participate in training and personal development activities, which is mutually beneficial to the employee and the company they work for.

Improving competitiveness and reputational benefits among the right stakeholders

The World Economic Forum argues that consumers are starting to hold companies accountable against unethical and unjust supply chain practices. Companies are being scrutinized against their material impact on the planet, specifically, on their contribution to the climate crisis. In the same vein, they will be scrutinized against their impact on people, specifically for the unequal distribution of wealth caused by exploitative capitalism. 

As companies are pressured to provide greater transparency into their supply chains and labor practices, there is a moral and reputational responsibility for employers to commit to not harming the planet and people, and to contribute to their regeneration. In 2021, ten companies publicly committed to ensuring a living wage for their employees throughout every segment of their supply chains.

Boldr’s commitment to a living wage

David Sudolsky, Boldr’s Founder and CEO, is staunchly committed to driving measurable and sustainable change in the BPO industry. Boldr’s Theory of Change focuses on providing sustainable economic opportunities around the world, such as access to digital skills training, meaningful and decent work, and a living wage as a means to address systemic unemployment and poverty in disadvantaged communities.

The third pillar of the Theory of Change is to ensure that by 2025 all employees are earning a living wage. Over the past eight months, Boldr has conducted extensive research towards finding a living wage baseline across our countries of operation by collaborating with universities and think-tanks in the Philippines, Mexico, and South Africa.

  • In the Philippines, Boldr held consultative dialogues with local research institutions and universities such as IBON Foundation and the Ateneo de Manila University regarding ongoing research on living wage baselines for the Philippines.
  • In Mexico, we are working with researchers from the Anker’s Institute towards developing a living wage baseline for the metropolitan area of Merida, Yucatan. 
  • In South Africa, we joined the Living Wage Coalition of South Africa to partner with the University of Cape Town and Tshwane University, towards establishing a  living wage baseline for the country.

The next step in Boldr’s living wage journey is to turn its commitment into action. David Sudolsky shares his personal perspective on this:

After a decade of working in the outsourcing industry, I’ve shifted my awareness to performing labor arbitrage to help companies build high-performing global teams. With this shift comes an awareness of just how powerful a tool outsourcing can be (if done correctly) to provide meaningful careers, and to deliver remarkable value for companies while uplifting the communities we operate in. 

One of the ways we seek to reimagine what outsourcing can be is living wage. We are committed to ensure that 100% of Boldr’s workforce is earning a living wage by 2025. 

We are excited to partner with trade unions, the private sector, academics, non-profit organizations and our team members to deploy a living wage in each of the countries we operate in. This is no easy feat and, frankly, we don’t have all the answers. However, I’m confident this is the right thing to do. Here’s to building a more equitable global outsourcing supply chain.

Glo Anne Pauline A. Guevarra is the Impact Manager at Boldr. She is currently taking up her postgraduate degree in Labor, Activism, and Development at SOAS University of London.

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