Loophole to allow remote work for 30% of BPO staff

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The co-chairman of the Fiscal Incentives Review Board (FIRB) says business process outsourcing (BPO) companies can have up to 30% of their employees working offsite, although companies cannot qualify for tax incentives only for work done in the office.

Commerce Secretary Ramon Lopez, co-chair of the FIRB, told reporters last week that a 30% Work From Home (WFH) configuration was permitted, confirming statements made earlier by the Philippine Economic Zone Authority. (Peza).

Government guidelines put in place earlier in the pandemic have allowed the BPO industry, the largest private sector employer, to retain its tax breaks while having up to 90% of its employees work from home.

It only lasted until the end of March, even after the BPO industry and Peza asked to extend the deadline until September. While the FIRB had previously said that would mean a 100% return to power by April, Peza revealed there was some wiggle room under the current rules.

BPO companies are considered exporting companies since their services are aimed at the foreign market. Exporting companies, under the current rules, would have to obtain 70% of their sales from the export market while the remaining 30% could be sold locally.

Peza now interprets this to mean that BPOs can have 70% of their employees work onsite while the rest work from home.

When asked to comment, Lopez said it was possible.

“The 70/30 ratio between exports and domestic revenues as a definition of exporting companies can also be applied to [the on-site/WFH] arrangement,” Lopez said in a Viber message over the weekend.

Reduced incentives

“Registered businesses that comply will continue to receive incentives. However, what may be questioned later by the Bureau of Internal Revenue is whether the incentives should apply to all project revenue, or only revenue associated with the 70% onsite,” Lopez said. .

At only 30%, it is still far from the hybrid configuration that the industry expected. Whether the industry would push for more flexibility, or instead hope for a more favorable stance from the next presidential administration, remains to be seen.

Peza said in a statement Friday that BPOs who cannot return to the office immediately can request an authorization letter from Peza with the necessary requirements.

Peza said he issued clearance letters to interested registered companies applying for hybrid operations even before the COVID-19 pandemic.

According to Peza, this hybrid work setup will continue until September 12, 2022, the end of the COVID-19 state of calamity declared by President Duterte.

BPO companies will apply individually by sending their applications to Peza, the agency said.

The pandemic has changed the way the industry views remote working, with IT and Business Process Association of the Philippines (IBPAP) President Jack Madrid saying in a recent interview that they realized they could grow even when employees were working from home.

“We found that our work, the work of our industry, the work done by the 1.4 million Filipinos, can be done at home,” he said. “We were able to achieve this without sacrificing productivity and customer satisfaction ratings, based on what we gathered. I don’t think we lost any business. In fact, we have grown.

Working from home has helped the industry thrive despite continued shutdowns, creating 23,000 new jobs in 2020, just as the crisis pushed the country’s unemployment rate to a 15-year high.

Its workforce grew another 8% in 2021, creating about 100,000 new jobs, while revenue last year rose about 12% to a total of $28.8 billion, according to data from the ‘IBPAP. At the end of last year, data from the IBPAP indicated that around 60% of employees in the industry were working from home.

Overseas BPO firms, including those in the Philippines’ biggest competitor, India, are likely to continue to have many of their employees working from home even after the pandemic, according to a previous Inquirer interview with group officials. Everest, a research firm that advises Global 1,000 companies to outsource their services. India is already adjusting its policies and tax breaks to support working from home. The Philippines, officials said, should follow suit or be left behind.

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