John Jonas explains why remote employers hiring Filipino workers should watch USD to peso exchange rates. A $600 monthly salary converts to 28,000 pesos at a 47 rate but 33,600 at 56, a difference of 5,600 pesos that affects living costs. He suggests contracting in pesos and adjusting pay only for major swings, treating 50 pesos per dollar as a baseline.
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Welcome to the Secret Sauce of Outsourcing podcast that's dedicated to making you better at working with online Filipino specialists. This is episode 186. Pay attention to the exchange rate. So a couple weeks ago in a podcast episode, I briefly mentioned the exchange rate when I talked about inflation and how it was affecting the Philippines also. So when I first started outsourcing to the Philippines in 2005, I had no idea what the exchange rate was. I was paying this agency $750 a month. They were paying this person 250amonth, Joven, the person. And none of it mattered to me. And when Joven told me he was quitting, he was leaving the agency, I was like, that's not reasonable. So I ended up hiring him on his own, and I was paying him $500 a month, which doubled his salary and cut my expense back. And it was amazing. Win, win for both of us. Until it wasn't A couple of years in. Joven emailed me, and this is in. This is the financial crisis of 2007. So Joven emailed me and said, sir, I don't know if you know this, but when we started, when you started paying us, the Filipino peso was at 50 to 1 US dollar, 50 pesos for $1. But now it's down to 38 to 1. And we've taken a 20% pay cut, and we've taken a 20% pay Cut because the dollar is weak right now. And I had no idea. I felt terrible. I mean, this is the housing crash of 2007. I didn't really know because I hadn't paid attention to the exchange rate at all. It had never affected me. So I started paying them more. I raised their salary 20%. And then I also started paying attention to the exchange rate. So now come 2022, the past two years, with global inflation, the exchange rate has become more and more volatile. Before the pandemic, the US the USD to PHP US dollar to Filipino peso was typically around 50 to 52. And it's been that way for years and years. And then since the pandemic, it has fluctuated between 46 and 56, which is a big range and it's a big difference. Today, as I record this, the peso is at 56 USD, which means they're actually getting more money for the same amount that I'm paying them, which is great for them. That has helped cover inflation because they're now, for every dollar I pay them, they're getting 56 pesos instead of getting 50 pesos. But that difference of 9 pesos, you know, between 47 and 56, it's not really much to us. But I mean, 9 pesos is roughly 20 cents. You can't buy anything for that. But when you're paying someone $600 a month, you multiply that $0.20 times 600, it ends up being like 5,500 pesos a month, which. That's $100. That's a big deal. So I'm going to let me talk through this with you. So you're paying someone $600 a month at 47 pesos to USD, it's like 28,000 pesos per month. So 28,000 is okay, but if the exchange rate's at 56, it's 33,600. So that difference between 28 and 33, 6, that's, you know, 5,600 pesos. 5,500 pesos depending on. Yeah, that's like a sixth of their salary. That's a, you know, that's a big deal. That's an amount that could pay for this month's Internet or a large amount of their groceries for the whole month. So some employers get around this by paying in pesos. If you just contract with them in pesos, I'm going to pay you 30,000 pesos per month, period. Then you don't have to worry about it, except you have to monitor the exchange rate every single month because then you have to send the right amount of US Dollars. It can be super simple if all you do is enter in the Filipino pesos amount into whatever you're using to pay someone, easy pay or wise or whatever it is you're using to pay. What I do is I monitor it, but I only change it for big fluctuations. So right now when it's at 56, I don't change anything because they're just getting extra money. And when it goes back down to 50, I won't change anything. When it goes to 45, though, I will consider adding extra money to them so that they're not taking a pay cut from 50. And 50 is really my baseline. Like that's what it has typically been at. The USD to PHP is about 50. And so below that is when I start to look at adding more above that. And I just figure they're having a. It's good for them. Now, I'm not saying you should do this all the time. I'm just saying it's something that you should be aware of. Also super simple to figure out what the exchange rate is if you search Google or any search engine, search USD in php, US dollars in Filipino pesos. Just search USD in PHP and they'll tell you the exchange rate right there instantly. If you search PHP and USD, it'll look weird compared to what I've just told you. It'll give you like 02 as the exchange rate instead of 50 or 52. So USD and PHP is typically the way that I search it.
