5 Common Offshoring Mistakes and How to Avoid Them

Offshoring your finance and HR operations to the Philippines can yield significant benefits, but success isn’t guaranteed by cost savings alone. There are several common mistakes companies make when setting up and managing offshore teams. Being aware of these pitfalls—and taking steps to avoid them—will help ensure your offshoring initiative delivers the results you expect. Here are five frequent offshoring mistakes and how your company can steer clear of them:

Mistake #1: Focusing Only on Cost, Ignoring Quality

The mistake: It’s true that offshoring offers major cost reductions, but some companies become so cost-focused that they choose the cheapest outsourcing provider or push salaries too low, without regard for the quality of talent or service. For example, selecting a partner solely because they offered the lowest price might result in subpar hires, poor management, or hidden fees that surface later (eroding those initial savings). Similarly, underpaying your offshore staff can lead to high turnover and inconsistent work.

How to avoid it: Take a balanced approach. While evaluating providers, consider their track record, client testimonials, and the value they provide in addition to cost. Look for transparent pricing (no hidden charges) and evidence that they invest in recruiting and retaining quality talent. When hiring offshore team members, offer competitive salaries (use market data or a salary guide to benchmark) to attract skilled professionals who will stay. In short, focus on the best value, not just the lowest cost. A slightly higher upfront cost for a reliable partner like Fidelas – known for vetted talent and honest pricing – can pay off massively in the long run through better performance and fewer headaches.

Mistake #2: Poor Communication and Integration

The mistake: Treating the offshore team as an isolated unit can severely limit their effectiveness. Some companies make the error of “set it and forget it” – they hand off tasks to the offshore team with minimal interaction or context, and then are surprised when misunderstandings or misalignments occur. This silo approach often leads to the offshore team feeling isolated, less motivated, and not fully understanding the company’s goals. It can also breed an us-vs-them dynamic between onshore and offshore staff.

How to avoid it: Integrate and communicate. Make your offshore team a true extension of your home office. Establish regular communication channels: schedule weekly video meetings, daily check-ins, or use collaboration tools (like Slack, Teams, etc.) to keep everyone in the loop. Share your company’s mission, values, and big-picture objectives with the offshore team so they understand how their work contributes. Encourage onshore team members to build relationships with their offshore counterparts. Even simple measures like involving the offshore team in all-hands meetings or celebrating their work anniversaries can make a big difference. Remember, an engaged team is a productive team – no matter where they’re located.

Mistake #3: Overlooking Legal and Compliance Requirements

The mistake: Some companies dive into offshoring without fully understanding the local laws and regulations. They might incorrectly assume their offshore hires can be managed exactly like their domestic ones. This can lead to compliance issues – for instance, misclassifying workers, not adhering to local labor laws, or failing to remit the necessary taxes and social contributions in the Philippines. Such oversights can result in legal penalties or operational disruptions.

How to avoid it: Educate yourself on the basics of Philippine labor law and tax requirements, or partner with experts who will handle it for you. One solution is to use an Employer of Record service, which takes on the legal burden by officially employing the workers and ensuring all local compliance (payroll taxes, benefits, contracts, terminations) is done right. If you establish your own entity, consider hiring a local HR or legal consultant and use a payroll compliance service to manage filings. Being proactive about compliance not only avoids fines, but also builds trust with your offshore team, as they see you are providing everything legally required (which is often also what’s fair and expected).

Mistake #4: Not Investing in Company Culture and Training

The mistake: Offshoring is sometimes approached with a “hands-off” mentality regarding team development. Companies might fail to onboard offshore employees with the same enthusiasm as local ones, or they don’t offer training and team-building to their remote staff. The result is an offshore team that feels disconnected from the company culture, less loyal, and lacking in certain skills or knowledge to perform optimally. This can also exacerbate cultural misunderstandings or communication gaps.

How to avoid it: Treat offshore employees as an integral part of your organization. Provide them with a thorough onboarding about your company’s values, products/services, and processes. Invest time in training them on your systems and the nuances of how you do business. Culturally, educate your onshore team about Filipino work culture and vice versa to foster mutual understanding. Encourage occasional travel if possible (bringing key offshore team members on-site or sending onshore managers to the Philippines for workshops) – these exchanges can greatly solidify bonds. Even without travel, implement virtual team-building activities and mentorship programs across regions. By nurturing a unified culture and skill set, you’ll avoid the “us and them” trap and significantly improve retention and teamwork.

Mistake #5: Choosing the Wrong Offshoring Partner or Model

The mistake: The success of offshoring often hinges on selecting the right partner (or operational model). A common mistake is rushing into a partnership with an offshore service provider that doesn’t align with your needs – perhaps they lack specialization in finance/HR roles, have opaque pricing, or insufficient support. Alternatively, a company might choose the wrong model (for example, trying to set up a foreign subsidiary too early instead of using a ready-made outsourcing solution, or vice versa), leading to unnecessary costs or constraints.

How to avoid it: Do your due diligence. Research and compare providers, ask for client references, and inquire specifically about their experience in building finance & accounting or HR teams. Transparency is key – insist on understanding exactly how the pricing works and what is included. A provider with 100% transparent pricing and no hidden fees (like Fidelas) ensures you won’t be caught off guard. Also, choose the engagement model that fits your strategy: if you’re testing the waters, an outsourced team or EOR arrangement is usually best; if you’re ready for a long-term large operation, you might gradually transition to setting up your own entity. Some providers will help you scale and even support that transition when you’re ready. The right partner will act as a consultant, not just a vendor, guiding you to avoid pitfalls from day one.

Conclusion

Offshoring offers immense benefits, but avoiding these common mistakes is essential to fully realize them. By valuing quality alongside cost, integrating your teams, staying compliant, building culture, and partnering with the right experts, your company can sidestep the typical offshoring traps. At Fidelas, we’ve seen firsthand what works and what doesn’t in setting up offshore finance and HR teams. We help our clients navigate these challenges from the get-go, so they achieve smooth, successful operations in the Philippines. With careful planning and the lessons from others’ mistakes in mind, you can confidently expand your team offshore and reap the rewards with minimal risk.