Lower wages lure BPO work to Eastern Europe

Central and Eastern European (CEE) countries continue to be popular destinations for business process outsourcing (BPO) and shared services, despite rapid economic development that is causing wages to rise. The trend is driving lower-skilled and process-based jobs away from Western Europe, where wages are considerably higher, according to research by HR consulting firm Towers Watson.

The General Industry Compensation Report shows that in countries such as Poland, Romania, Bulgaria and Hungary, wages for low-skilled business functions are between two and four times lower than they are in the UK.

Wages for commonly outsourced roles are even higher in Germany, Belgium, France and Ireland, where lower-skilled workers can earn up to 57% more than their UK counterparts, which is up to six and a half times higher than workers in the larger CEE economies.

Darryl Davis, a senior consultant in Towers Watson’s data services business, said in a statement that strong growth in BPO services in CEE countries has left lower-skilled workers in the UK and Western Europe vulnerable.

“However, companies considering this approach should be cautious as nominal wage inflation can be an issue in many emerging [CEE] economies,” Davis said. “We have already seen Turkish wages increase significantly in the last few years as workers are able to demand pay increases that keep pace with the cost of living.”

Cheaper labour pool

The research gathered data on four business functions that are commonly offshored to low-cost economies. These jobs include clerical, as well as entry-level and experienced professional roles in finance, accounting and IT development, and infrastructure functions.

It found that a typical account support clerk in the UK earns £21,000 ($31,920) a year, compared with a Western European high of £32,000 ($48,640) in Belgium and an equivalent salary in Bulgaria of £5,000 ($7,600). Poland and Romania are also competitive, with salaries of around £7,000 ($10,640), while Hungary is slightly higher at £9,000 ($13,680).

An experienced IT professional’s annual salary in the UK averages £42,000 ($63,840), which is lower than a German counterpart at £57,000 ($86,640), but well above IT salaries in Bulgaria and Romania £15,000 ($22,800), and Poland and Hungary £19,000 ($28,880).

The study highlighted a similar pattern for other roles, including entry-level accounting professionals, experienced accounting professionals and entry-level IT development professionals.

“Undoubtedly, cost savings are a major benefit of outsourcing, but it should not be seen as a silver bullet,” said Andrew Steels, Towers Watson’s UK HR service delivery practice leader, in a  news release. “While cost savings may be achieved, many companies risk altering their culture and impacting customer expectations, both external and internal, so decisions of this nature should be carefully thought through.”