Outsourcing Overseas: A Practical Response to Rising Employment Costs

Jean Jones ATPI, Senior Property Manager – Compton Group

You don’t need me to tell you that these are extremely challenging times for residential block managers. On the output side we have to deliver the highest level of service, while constrained with the threat of tribunal proceedings in what we can charge. And on the input side the costs of employing personnel, our biggest overhead, has shot up in the last year. I will explain how to square the circle: I will tackle this issue at Compton Group.

Back Office Burden

A peculiar feature of block management is that leaseholders who pay for services usually have little or no idea how much administrative and accounting work is needed behind the scenes to manage a block. The administrative burden on the sector has grown heavier in the last few years as we have faced a welter of statutory and regulatory changes. Inevitably, this has led to higher costs for the sector. Nor is there any likelihood of the trend reversing anytime soon.

We will soon have to cope with well-intentioned changes of mandatory qualifications, the imposition of standardised service charge demands, a six-month timeline for producing service charge accounts and a requirement to make information about service charges more accessible to leaseholders. The Government and leaseholders no doubt want us to deliver this extra level of service at no additional cost. In addition, we are now having to deal with ChatGPT ‘slop’ which is the icing on the cake in terms of calls to our time.

UK Employment Costs

Against the backdrop of high service expectations, our sector has also had to contend with a significant increase in employment costs. The minimum wage for employees aged over 20 years is now £12.21 per hour. The rate of employer’s national insurance was raised in April 2025 from 12.8 per cent to 15 per cent for earnings over a lower threshold of £5,000 per annum. After taking into account 28 days’ statutory holidays and a 3 per cent employer’s pension contribution, the minimum wage for a full-time employee works out in practice at £15.62 per hour. No allowance is made for doctors’ appointments or sickness in this figure. But you do need to add overheads such as rent,

rates, utilities, insurance, office supplies and IT equipment – resulting in an all-in cost of an entry-level employee of around £20 per hour.

Of course, the costs of employing more experienced or qualified staff will be much higher again. One way to mitigate these costs is to outsource the back office work overseas to countries where employment costs are much lower.

Compton Group Experience

In 2007 we took the decision to outsource some of our back office functions to a wholly owned subsidiary in Chennai, India. Our thinking at that time was to save our Chennai office to help out with our ground rent invoices. Many of our ground rents were less than £20 per annum; with the administrative costs of collection eating into the rent, it made sense for us to outsource some of this high volume, low value work to the Chennai office. Over the years we came to rely more and more on our colleagues in Chennai, with a greater workload being outsourced. They now help us extensively across the business.

One of the businesses in our Group is block management. We currently manage 230 blocks in England and Wales, comprising just over 3,200 units. We manage only where our Group owns the freehold or leasehold reversion, about 30 per cent of the total. We do not manage any blocks where we do not own the reversion. The rest are managed by RMCs, RTM companies or managers embedded in the relevant leases.

In the last 18 years our colleagues in Chennai, some of whom are qualified accountants, have become more and more involved in the back office function of our block management business, gaining a great deal of experience along the way. They do not deal directly with the leaseholders of our managed blocks, but carry out all accounting functions (for example raising service charge invoices, preparing annual accounts for each block, and maintaining debtors’ and creditors’ ledgers). The treasury function is kept in the UK, which strengthens our internal controls through a division of labour. Our colleagues in Chennai also carry out non-accounting functions, such as preparing draft budgets and placing contracts with

suppliers for recurring expenditure, and assist our debt recovery team by preparing reminder letters. This has resulted in faster collection of debts, thereby reducing the need for freeholder funding.

Advantages of Outsourcing

The main advantage of outsourcing is obviously the cost saving. We have added bonus of directly employing staff in Chennai but, even if a UK block manager were to go to a third party provider of outsourcing services operating from (say) the Philippines, South Africa or India, we estimate that you would be looking at around £7 per hour for the equivalent of someone with an all-in cost of £20 per hour in the UK – a 65 per cent saving. Similar percentage savings would also be made for higher grade employees.

Many recruits in our Chennai office are young, highly motivated graduates, skilled in IT. They are exceptionally keen to learn. We now employ 60 people across all our different businesses. There is never any problem in finding new recruits when needed.

Our Chennai colleagues produce work of a very high standard. I will give just two examples.

First, they reconcile the trust funds to the penny every day. As you know, block managers owe fiduciary duties to leaseholders under section 42 of the Landlord and Tenant Act 1987 as trustees of service charge monies collected. It is not sufficient that reconciliations are carried out so that they are ‘near enough’. There could be compensating errors; reconciliations must be carried out to the penny. We have the comfort of knowing that our Chennai colleagues are doing this each day and not just postponing the reconciliations for when they have more time to complete them.

Second, we have had enormous difficulties lately with SSE’s electricity bills. Our Chennai colleagues, when checking invoices found the opening meter readings on bills did not match the closing meter readings on previous bills. Putting together all the details on these discrepancies involved an enormous amount of work which would have resulted in disproportionate additional costs had UK staff been required to carry out this exercise.

Challenges Faced

When we decided in 2007 to outsource back office work to India, we promised our UK staff that no one would be made redundant as a result of the outsourcing. We have kept our promise. However, we did find that staff keen to embrace change and happy to see some of the day-to-day tasks move over to our Chennai office thrived; in fact, their jobs became more interesting and challenging. But for those who did not want to embrace the change, the experience was much more difficult; either their jobs became less skilled or they moved on.

Outsourcing is not always plain sailing. We have found that it is better to keep some tasks in the UK. Outsourcing works best for us when we have an established, clearly defined workflow for our Chennai office to follow. We therefore, an information management platform originally developed by Canon, to create these workflows.

Then there is the time difference between the UK and India: 4.5 hours in summer and 5.5 hours in winter. It means that most direct interactions with our Chennai colleagues take place in our mornings, their afternoons. We have found this more than sufficient to deal with any queries or discussions. The time difference can also be an advantage; we can send out a request in the late afternoon, to find a reply waiting for us when we log in next morning.

Final Thoughts

The block management sector is facing headwinds from many directions. The cost of our most important resource, our employees, is increasing. Further, Government and leaseholders demand more services with more time. These factors will inevitably lead to ever increasing service charges and/or an impairment in the financial performance of block managers. Neither of this is good for the sector.

One way of mitigating the effect of these challenges is to outsource back office and accounting functions overseas where employment costs are much lower. This frees up the time of UK-based staff to concentrate on providing services which are more visible to paying leaseholders, who will perhaps be more inclined to see that the services provided represent good value for money.

As published in The Property Institute AQD Magazine, December 2025.