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Rising Wages and the Contact Center Industry

Rising Wages and the Contact Center IndustryThere have been many changes in the global economy over the past year. One common pain point among both clients and BPO providers: wages have been rising steadily throughout 2021, and experts predict that this trend will continue into 2022.

Domestic Wage Increases: Now and Future

From October 2020 to October 2021, the USA saw a 9.77 percent wage hike, with lower-paid employees benefiting the most. These wage increases have been driven by several factors, from the early retirement of older employees to women leaving the workforce to cut daycare costs. Positions once held by these groups are freeing up, causing an excess of open jobs without a large enough working population to fill them.

With the high competition over potential employees, businesses have had to add competitive advantages to their hiring plans. Not only does this include higher overall wages, but the inclusion of benefits for positions that historically had none. Some companies have even gone as far as adding lesser seen perks like pet insurance, or sabbaticals to travel and explore interests outside of work.

In addition to the huge rise in the last year, wages in the USA are projected to continue climbing by 3.9 percent through 2022.  In truth, daily life for consumers will continue to reflect the growing tension between potential employers and candidates. Many consumers have already noticed barren grocery store shelves and longer wait times in restaurants as service and supply chain industry positions remain unfilled.

No industry is safe from rising labor costs, especially the contact center industry where a majority of employees are the heavily affected low-wage earners. Aside from just wage inflation, recruiting cost increases and benefits additions have put a major strain on the margins of domestic contact centers. Due to these tighter margins, BPO leaders have had no choice but to renegotiate contracts in an attempt to avoid operating at a loss, often doing so with little warning to their clients

Global Wage Increases: Now and Future

Although a majority of wage growth has been seen in the United States, wages have also risen globally over the last year. Many countries have seen companies offer more competitive compensation in a bid for skilled workers, including India, the Philippines, and South Africa.

As costs rise domestically, other countries will begin to see more U.S. companies looking to outsource any positions they can to less expensive regions in an attempt to keep costs under control. The surge in demand for employees in nearshore and offshore regions, coupled with each country’s changing workforce, will undoubtedly affect the United States’ global partners. In fact, through 2022, compensation growth in South Africa and the Philippines is forecast to be roughly 6 percent each. India is set to experience a rise similar to the 2021 numbers in America at 9 percent.

As with domestic changes, global wage increases will have an impact on the BPO industry as well. Many companies have seen the cost savings and reliability of outsourcing, leading them to move some or all of their support to other regions. This influx of business has put a strain on foreign markets, which has caused the costs of their outsource contact centers to go up.

What Can You Do To Prepare?

Whether your company utilizes in-house or outsourced customer support, everyone will feel the labor cost surge. If you prefer to keep your contact center support in the United States, you can expect to see costs go up and should budget accordingly. Of course, there are still price differences among domestic BPOs due to factors such as location and call center size, so there are opportunities to minimize the financial impact. It may simply mean moving support to a state or region that is less expensive, or from a large provider to a mid-sized one.

But the most effective way to reduce, or at least maintain, call center costs is to look beyond our borders. There are hundreds of BPOs across the globe that provide comparable – often superior – customer service at a lower price point. Established players like the Philippines and Latin America have already proven themselves to be exceptional options, and emerging markets like Africa aren’t far behind.

The biggest key to offsetting rising costs is simple — plan ahead. Business leaders will need to understand and embrace the changing market in order to adapt. Additionally, having an understanding that competition for outsourced services is becoming fierce will help prepare you while scouting new BPO partner opportunities. Adaptation may ultimately mean being prepared to pay more, look for new partners, or both.

Simply put, your BPO partner isn’t always going to be able to give you notice regarding cost adjustments — you need to be prepared before they bring it up. Having a full understanding of your options and potential costs will put you in a better position to make wise choices.

Outsource Consultants knows the industry and understands the trends, so we can help you sort through your options and help you find the right outsource call center should you choose to add or replace partners. Get started with a no-cost, no-obligation call center cost proposal.