Toll Free: 1 800 371 6224 | US: +1 650 204 3191 | UK: +44 8082 803 175 | AU: +61 1800 247 724 | Philippine Local No: 63-2-83966000

Toll Free: 1 800 371 6224 | US: +1 650 204 3191 | UK: +44 8082 803 175 | AU: +61 1800 247 724 | Philippine Local No: 63-2-83966000

statistics on the philippine bpo industry banner
2022 Latest Report: Statistics on the Philippine BPO Industry
Outsourcing to the Philippines: a Good Place to Begin Your Startup
Outsourcing to the Philippines: a Good Place to Begin Your Startup

Home | Blog | Rise of Underground BPOs: Risks and What You Need to Look for to Avoid the Traps

Rise of Underground BPOs: Risks and What You Need to Look for to Avoid the Traps

By Janselle M.

Updated on June 5, 2024

Looking for an accurate quote for your outsourcing needs?

Schedule a FREE call with our outsourcing expert now and get a precise quotation that meets your requirements. Don't wait - get started today!

Underground BPOs: Risks and Traps to Avoid

With the ongoing Ukraine-Russia war, the World Bank believes a global recession may be on the horizon, putting businesses at risk again. Meanwhile, inflation soared in the Philippines to 6.1 percent in June 2022, its highest level in almost four years. With the skyrocketing prices of essential goods and commodities, can you manage to cope if there’s another bump your business might face?

While business process outsourcing (BPO) is hailed as a significant economic pillar of the country, it might be jeopardized because of the rise of underground BPOs. Since these underground BPOs are only a phone call away, BPO employees need not worry about losing their benefits or quitting their jobs, especially now that licensed BPO companies must work onsite.

Keep reading if you want to know if it is worth dipping your toe in this growing underground BPO.


What is an Underground BPO and How Does It Work?


Underground BPO implication infographics

Sources: Philippine Economic Zone Authority (PEZA) & IT & Business Process Association of the Philippines (IBPAP)


These are BPO companies that do not have government registration and permit. They offer work-from-home (WFH) setups while paying employees relatively higher salaries. Unfortunately, there is no security of tenure on the part of employees.

Underground BPOs are limited to services such as virtual receptionist type and minor specialized roles. It is inappropriate for lead generation, customer service, and synchronized large-scale back-office operations. Even if they entice licensed BPO employees with perks, underground BPOs are unreliable and incompetent. They’re unreliable because they don’t pay taxes or protect their employees. BPO scams virtualize their application processes, making monitoring their recruitment and other operations harder for the government.

While these underground BPOs operate under WFH setups, the BIR (Bureau of Internal Revenue) and BOC (Bureau of Customs) conduct ocular inspections if registered IT-BPOs implement 100 percent onsite work. Licensed BPO companies have been warned to resume onsite activities by the Fiscal Benefits Review Board (FIRB) or risk losing their tax incentives.


Underground BPOs: Cause for Alarm

According to the Philippine Economic Zone Authority (PEZA), as the number of illegal operations in the IT-BPO industry increases, the government would lose more tax revenue because these unregistered businesses fail to fulfill their obligations and do not provide employees with secured tenure.

Long-term lockdowns caused the growth of unregulated underground BPOs in the Philippines, which snatched up talent and provided workers with nothing more than a risky paycheck.

These underground BPOs provide hefty salaries between PhP 30,000 and PhP 40,000. Since the pay is high and a WFH setup, BPO employees are much more willing to shift to these underground BPOs without knowing the implications.

According to PEZA, not allowing the hybrid scheme for registered BPOs will result in the government suffering a significant loss.

Now, Registered and PEZA are battling to reclaim their tech employees but are losing the initiative. BPOs can only make user tax benefits under regulations in efe Philippines if their employees return to the office.


Why are Underground BPOs successful in recruiting employees from IT-BPO companies?

According to PEZA, these underground BPOs can recruit talents immediately because of the high salary offers and WFH setup, which BPO employees prefer rather than returning to the office.

Not only would there be issues regarding their credibility, but problems with connectivity will also undoubtedly arise as wa nation labeled as Southeast Asia’s highest income tax rate and with an increased number of Covid-19 cases, these BPO employees from underground BPOs prefer to stay at home and keep their entire paycheck despite the risk that comes with it.


Underground BPO Main Hurdles: Risks Regarding Information Confidentiality and Data Security


Why not engage with an undergraound BPO infographic


Data security is becoming more crucial than ever. Thus many people are interested in learning how BPO companies handle it. Many businesses worry that hiring a third-party BPO company might put their data at risk.

Just like these underground BPOs are not registered with the government, they also do not have certifications essential for confidential information and data security.

  • NOT Payment Card Industry Data Security Standard (PCI-DSS) certified
  • NOT ISO 27001 certified
  • NOT Health Insurance Portability and Accountability Act (HIPAA) compliant
  • NOT General Data Protection Regulation (GDPR) compliant

Since these underground BPOs cannot be held liable for significant issues, no method exists for data privacy regulations.


Your company’s private information is vulnerable to danger without high-quality data protection, which could harm your business’ success.

One of the key benefits of working with a BPO company is the availability of data-related services, including data security. When skilled experts manage your company’s confidential and sensitive data procedures, you immediately increase efficiency and accuracy while lowering expenses.

These regulated BPO firms protect not only their company but also your needs. At least when you hire them, you know you are putting your money in a legal basket. With the excellent service these BPO companies, freelance call center agents, and freelance BPOs provide, you will surely get your money’s worth.



Generally, whenever you enter something, whether it be a business, relationship, or new place, you always check references from others to know what you’re dealing with. You can devise a strategy or solution for dancing the waves.

Hiring call center services, freelance BPO, and BPO freelance call center agents for your outsourcing needs better. You do not want to engage in an underground BPO that is no match with licensed BPO companies with positive customer feedback.

With licensed BPO firms, you know that they will indeed act in your business’s best interest. Underground BPOs that merely offer a cost-value proposition should be avoided since they frequently fail. You get what you pay for, which is not worth it.


Magellan Solutions Can Assist in Providing the Appropriate Outsourcing Services for Your Business Needs

Make an impact on your business and get the results you’ve always wanted.

Magellan Solutions will surely help you with your business needs and goals at a fraction of the price without compromising quality.

With 18 years of expertise in the field, we take great pride in offering only the best call center services. On top of that, we are an ISO-certified and HIPAA-compliant outsourcing company. We provide a great variety of top-notch outsourced business solutions.

Give us a call, let us assist you with your business needs.


Talk to us!

Contact us today for more information.

    You can also contact our numbers:

    Want to know more?

    Explore our services further by filling out the form below, and we'll reach out to you soon!

      Give us a call!


      1 800 371 6224

      United States: 

      +1 650 204 3191

      United Kingdom:

      +44 8082 803 175


      +61 1800 247 724



      Get a free custom quote & unlock outsourcing potential.


      Rise of Underground BPOs: Risks and What You Need to Look for to Avoid the Traps

      Janselle M.

      As a content writer at Magellan Solutions Outsourcing Inc, Janselle creates captivating stories that connect with SMEs. With a passion for storytelling and a sharp eye for detail, she focuses on crafting engaging content to boost their digital marketing. She is driven by excellence, aiming to deliver messages that make their brand stand out.

      Related Articles