High domestic minimum wages, onerous labor regulations and cheaper rates overseas are some of the reasons for why do companies outsource jobs internationally.

Why Do Companies Outsource?

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Companies outsource because of high domestic minimum wages, dramatically cheaper rates overseas, onerous domestic regulations, the prevalence of English fluency worldwide and because technology has made it possible to do virtually any task remotely and online.

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It’s well known that domestic wages in much of the developed Western world are extremely high, often because of the high cost of living and a scarcity in skilled workers. Furthermore, high minimum wages make it impossible for many small businesses to hire entry level or other low skilled workers domestically.

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The federal minimum wage in the US is currently $7.25 per hour, but certain states and cities already have much higher local minimum wages in effect. For example, the District of Columbia has a minimum wage of $13.25 per hour, California has a minimum wage of $11 per hour, San Francisco has a minimum wage of $15 per hour and NYC has a minimum wage of $15 per hour.

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Furthermore, certain professions in certain U.S. states have minimum rates of pay. For example, California Labor Code sections 515.5 and 515.6 requires computer software professionals to have a minimum hourly rate of pay of $39.90 as of January 1st, 2019 (monthly minimum salary of $6,927.75 and an annual minimum salary of $83,132.93).

Rates are no cheaper outside of the U.S. either. For example, the national minimum wage in the U.K. for all workers aged 25 and over is £8.21 per hour as of April 2019.

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Pro Tip: Keep in mind that the average quality of minimum wage worker in the U.S. in terms of experience, skills, professionalism, enthusiasm and education will generally be towards the bottom of the range. Paying the minimum wage, as high as it might be, doesn’t in any way guarantee you a quality hire. In fact, workers receiving the minimum wage in developed countries may have the worst attitudes and be generally resentful of the fact that they’re being paid the least. Now you know what to say next time someone asks so why do companies outsource!

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Companies outsource primarily because of the dramatic arbitrage in the cost of labor between the developed world and the developing world.

For example, the National Floor Level of Minimum Wage in India is currently 160 Rupees per day. However, this minimum wage is non-statutory and state and local governments have their own minimum wages for different types of workers. Furthermore, many illiterate or unorganized workers are taken advantage of on a regular basis and work for far less than the minimum wage. For example, many household workers regularly earn less than 20 Rupees per day.

Of course, a Western company that decides to outsource to a country like India cannot take advantage of these minimum rates because workers in this price range are generally illiterate and uneducated.

However, rates will still be much more affordable vs the Western world. For example, a fluent, English speaking virtual executive assistant might cost roughly $6 a hour. A top tier software developer who graduated from IIT might cost $60,000 vs $150,000 to $200,000 in the U.S.

The Philippines is  another low cost destination for Western companies to outsource to. Like India, the minimum wage in the Philippines varies depending on the region. The minimum wage can be as high as 537 PHP per day in metro Manila, or just a little over $10 per day as of this writing. This minimum wage of just over $1 per hour is fairly common as a starting salary in call centers across the country.

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Pro Tip: Keep in mind that the cost for an experienced, virtual assistant who speaks fluent English will cost more than the minimum wage. You truly get what you pay for, and you can expect to pay roughly $6 a hour for a top tier virtual assistant, meaning someone who’s experienced, speaks English fluently with a neutral accent, is capable of working a night shift, has a broadband internet connection, and has an above average typing speed.


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A major reason that drives companies to outsource is the complexity and burden of complying with local labor regulations, especially when it comes to providing benefits, payroll processing and paperwork.

Whenever you hire an employee in a developed country like the U.S., not only do you have to pay at least the minimum wage, you’ll need to set up payroll processing, tax withholding and deal with a whole slew of tax reporting requirements.

Furthermore, large employers in the U.S., classified has companies having 50 or more full-time employees, must provide adequate health insurance coverage to at least 95% of their employees and dependents or face a fine. Given the cost of health insurance in the U.S., this can be a significant additional cost for employers in addition to wage expenses.

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Pro Tip: Employees will generally expect a 401(k) plan and matching contributions from the employer, even if it’s not legally required for employers to set up a company retirement plan or to match employee contributions. All of this adds up when calculating the true cost of a domestic hire!


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English has become the de facto lingua franca of the world, with many developing countries such as the Philippines and India even using English as a primary language, in addition to other primary languages such as Hindi or Tagalog of course.

Because of the widespread familiarity with English in developing countries such as the Philippines or India, where a wide swath of the population speaks English, business process outsourcing to these countries has become extremely attractive to developed world companies.

As a further benefit, some countries like the Philippines are known for having a neutral English accent, meaning that it can be hard to tell whether someone is actually based overseas if the virtual worker has a high degree of English fluency.

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Another reason for why do companies outsource jobs overseas is because virtually any service sector task can be done online and remotely these days. For example, a virtual executive assistant can answer a VOIP main office phone line, answer emails, handle customer service tickets, create infographics, design logos and even call back customers remotely.

Furthermore, it’s extremely easy for virtual teams to collaborate online through free tools such as Telegram and Google Drive or through paid tools such as Slack. You can even have video conference calls and share your screen with your virtual team through free tools such as Skype.

You can easily keep track of your employees and monitor how much they’ve worked and what exactly they’re doing through time tracking software, such as Jobstob’s proprietary software which takes random screenshots of your virtual assistant’s screen on a regular basis.

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