PHILIPPINES Law and Practice Contributed by: Kerwin K. Tan, Veronica S. Balbin and Jose Maria B. Buenagua, Tan Hassani and Counsels
4.6 Performance Measurement and Management
as service availability, response times, recovery times following an outage, acceptable levels of data loss, scheduled maintenance periods, and procedures for issue escalation. Additionally, it should outline how software updates are deployed, the duration of sup - port for older versions, notice periods for the retire - ment of features, access to system interfaces, usage limits, and controls governing subcontractors. Pricing models should correspond to actual usage, incorpo - rating agreed caps and service credits where perfor - mance targets are not met. An exit plan should ensure the smooth export of data, its secure deletion, and reasonable transitional assistance. While cloud-based services may influence the manner and speed with which services are delivered – thereby affecting customer satisfaction – they do not funda - mentally alter the core contractual terms and condi - tions governing the outsourcing relationship. In the Philippines, there are several ways that a foreign company looking to hire Philippine-based staff may initially hire their employees. The first is through an employer of record (EOR) mod - el. An EOR refers to a third-party Philippine company that puts the staff on their own payroll and manages the HR function on behalf of the foreign company. The EOR charges the foreign company for employee salaries, along with a service fee. 5. Employment Matters 5.1 Employee Transfers The second is through an independent contractor relationship with the Philippine-based staff. If hiring through an EOR is not an option, the foreign compa - ny may also directly engage the staff as independent contractors. This may have employment law compli - ance issues later on, despite the staff being classified as independent contractors. The third option involves setting up a Philippine entity, such as a wholly-owned subsidiary, representative office, branch office, regional headquarters, or regional operating headquarters. These different types of com - pany (or special purpose vehicles) have different func -
Just as consumer rights are protected by contract law and terms of service, the performance of an outsourc - ing service provider is bound by the key performance indicators (KPIs) detailed in the outsourcing contract. Because the type of services that are outsourced is varied and broad, such as services relating to infor - mation technology, accounting, sales, data entry, and customer support, there is no fixed measure of performance for the output of a service provider. Performance generally depends on the type of ser - vices provided. However, a common denominator for measuring performance is customer satisfaction. The customer here can either be an internal stakeholder or an external stakeholder being serviced by the out - sourcing provider. Although cost savings are often a key motivator for outsourcing, if the service provider’s performance does not meet expectations, the cost- benefit trade-off may not justify continuing the out - sourcing arrangement. KPIs are best implemented as service levels in the out - sourcing contract, with clear definitions covering what is measured, the data source, the party responsible for measurement, the time period and formula, the target and minimum level, and the consequence of a missed target. Remedies may include service credits, correc - tive action plans within a set time, personal improve - ment plans (PIPs) to address individual performance issues, and termination rights for repeated failure. A PIP is a structured plan that identifies specific areas for improvement, sets measurable goals, and outlines the actions and timelines needed to achieve them. 4.7 Digital Transformation In terms of managing and measuring an outsourcing supplier’s performance, the contract terms do not really differ if the outsourcing service is cloud-based. In general, the contract should establish who handles security and day-to-day operations, where data is stored and when it may leave the country, what secu - rity standards apply, and the right to audit. The agreement should also require prompt incident reporting and include service levels expressed in clear, measurable terms. These should cover factors such
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