Outsourcing
The nuances of Australia as a market for BPO services
The Land Down Under is known for many things, from Vegemite to koalas, but what’s less known is that it’s the most expensive place in the English-speaking world to run a call centre. Australia has the world’s highest national minimum hourly wage at A$26.44/hour, and customer service agents earn on average 10% more than the UK. Office rental in Tier 2 cities reveals an even bigger discrepancy, with Manchester at least 20% cheaper than Adelaide.
What’s more, Australia has a strong union movement and complex employment regulations, with penalty rates, overtime and allowances governed by 100+ industry- and occupation-specific “Modern Awards”. Then there are State-specific rules, such as recent legislation in the state of Victoria that will give employees the right to work from home two days a week. As Victorian Chamber of Commerce and Industry chief executive Sally Curtain said, “Business simply won’t be able to afford this cost.”
For all these reasons, the number of BPOs operating large delivery centres within Australia is small, and the appetite for offshoring is high – although AI is changing the mix of work.
Domestically, it’s Government and regulated sectors such as health, education and financial services that keep the industry busy. The Covid pandemic, while it lasted, gifted the onshore sector thousands of jobs in outsourced contact tracing, employee assistance and vaccine booking hotlines. With those gone, the opportunity shifted to the burgeoning areas of aged care, disability support and the niche provision of telehealth services (which are booming).
The pandemic gifted onshore providers another unexpected opportunity: it exposed the risk of over-reliance on offshore BPOs, as lockdowns and shutdowns in the Philippines and India left Australian consumers without service, for a period, at some of the country’s biggest brands. Telstra, Australia’s biggest telco, famously announced that all voice customer service would be returned onshore (through a combination of outsourced and inhouse contact centres) – and this happened in 2022.
Despite the trend since towards onshore/offshore hybrid service delivery as a core geo-risk management strategy, offshoring continues to dominate the industry narrative. And for large employers like banks, it’s as much about talent access as it is about cost savings. CBA, Australia’s biggest bank, has 6,500 people in India, while ANZ Bank has 9,000, in addition to 2,500 in Manila. These workforces deliver not just routine customer service and back office tasks, rather in-demand, sophisticated skills across areas such as AI, analytics, security and financial crime.
While the big banks focus on GCC (Global Capability Centres) and traditional managed service outsourcing as the operating model, the small and mid-market in Australia has taken a different approach offshore.
On Matchboard, around 40% of BPO deals are a cosourcing, or staff leasing arrangement. Under this model, the BPO supports the recruitment process and is the Employer of Record, processing payroll and managing local HR issues, while the client directly manages the daily workflow of their offshore team. Most BPOs offer the choice of office-based or home-based work, although some provide just one or the other option. This model is particularly dominant in sectors like retail, ecommerce and marketplaces, and one of the attractions is the pricing model.
Cosourcing BPOs often have two line items on client invoices – (1) wages / oncosts without margin, and (2) a per FTE monthly management fee which remains the same regardless of the role. Many companies like this transparency and simplicity for budgeting purposes, and the cost is lower than a managed service because the BPO doesn’t have to price in risk and operational management. There are some cosourcing BPOs that provide just one all-in hourly or monthly fee based on the role, for clients that prefer that model.
Staff leasing operators also got a boost when the Government’s Fair Work Commission ruled in 2025 that a remote Filipino paralegal, hired directly by an Australian law firm, was legally an Australian employee rather than an independent contractor, thus entitled to Australian workplace protections – such as unfair dismissal. Hiring of offshore contractors has been a popular approach for SMEs, but the risk of legal action has now incentivised many Australian businesses to go through a staff leasing company (as the Employer of Record) instead.
Some of the biggest cosourcing, or staff leasing operators in the Philippines and other offshore delivery locations are founded or owned by Australians. The popularity of this model seems to be a key difference with the US and UK source markets. One of the reasons may be that because of the smaller scale of the Australian market, it doesn’t always make sense for SMEs to offshore customer service alone, so they uplift a variety of back office functions – accounting, marketing, admin, I.T. – together with customer support, and this combined scale makes sense for offshore, all under the umbrella of cosourcing. UK/US businesses are more likely to have the scale to go to a CX-specialist outsourcer as a managed service.
Another key difference between outsourcing from Australia versus from the US and UK is location preferences. For customer service, the Philippines and Fiji are the most popular choices for Australian businesses. Fiji is one of our most popular holiday destinations, just four hours’ flight from Sydney and with one hour time difference. So when the Fijian Government decided to make a push for the BPO industry (Covid highlighted the economic risk of over-reliance on tourism), the Aussies embraced it. Now some of our largest retail and travel brands outsource there. It’s noteworthy that for geo-political reasons, and to support our Pacific neighbours, the Australian Government has also actively contributed to the growth of Fiji’s BPO industry through a vehicle called the Market Development Facility.
Vietnam is growing popular for I.T. services, but also has a great talent pool for graphic design and marketing. While Vietnamese BPOs are increasing their marketing spend in Australia, South African BPOs have on the whole not been active in the Australian market for several years, reflecting a decline in Australian market share.
New locations are always emerging and there’s a smorgasbord of countries vying for Australian business – it’s truly a buyer’s market.
In the global business services landscape, one key area of fluctuation is currency exchange rates. When I lived in New York in 2001, the Australian dollar was worth just US$0.50, making Australia an attractive offshore destination for premium English-language service. Thanks to a mining boom 10 years later, however, it went to US$1, exactly double! Now, at US$0.70, Australia is typically not a place international businesses look to for BPO services, unless the target market is the Australian consumer. An exception is where there is a need for both native English and a variety of Asian languages, thanks to Australia’s multicultural make-up – 30% of people in Sydney and Melbourne don’t speak English at home!
While the Australian lifestyle is the envy of many, our high costs and onerous employment rules are barriers for BPOs, making offshore delivery through third parties an attractive model well into the future. And while AI eats up much of the routine work, some worry that it’s the advanced skills – from AI to analytics – that are increasingly leaving our shores and creating a massive capability gap in the local labour market. That’s a problem we must address before it’s too late.
