The Dawn of Flexible Workforce within India’s Labour Market

By Published July 8, 2017
Temp agencies

The second-largest of the BRIC countries – by the size of its economy and population, India’s current economy is experiencing an upward curve. In 2012 after a modest expansion of the economy at 3.2 percent, the International Monetary Fund (IMF), came out with an annual report, where it estimated that India’s economy is poised to grow at 6% by 2020.

However, going by the existing norms it has to be accepted that commercial volatility is a reality in today’s economy that has been instrumental in shaping India’s current labor force. There has been a sudden upsurge in the temporary workforce, and most companies are resorting to temp agencies to make their talent acquisition needs to be met.

Temp agencies

The Indian staffing market is already in the process of considering a substantial percentage of the population in the labor pool, and it is poised for rapid growth. It is reported that in the years to come, or at least by 2025 the Indian staffing market will be the leading in the world.

As per industry reports, hiring via temp agencies will go up and eventually temporary workforce within India is likely to account for 10 percent of the country’s formal sector employment by 2025. Currently, India is home to one of the largest flexi staffing workforce numbers in the world preceded by China and the US.

Recruiting via temp agencies, eventually resulting in temporary staffing has become a key hiring strategy for Indian corporates especially in the Information Technology (IT) and retail sector. This has been the trend owing to fewer obligations towards employees from the employers who have hired them. The Indian IT sector has the highest number of temp workforce as compared to rest of the sectors. The Indian Staffing Federation (ISF), an apex body of temporary staffing, said that hiring via temp agencies is on the rise and overall temporary workforce is rapidly growing at a rate of 35% to 40% despite the volatility in the economy. In fact, the economic downturn has been instrumental in providing the required fillip to the temporary staffing industry. Economic slowdown implies a decrease in business, and therefore temporary staffing has become an alternative solution over permanent staffing. Compared to permanent staff, the temporary workforce is convenient because of fewer responsibilities, fewer benefits, less remuneration and also the option of termination at any point without much explanation.

Similarly, the government sector in India is also home to a huge percentage of the temporary workforce. With time, the Indian government has also begun resorting to temp agencies to fulfill their requirement of the talent pool. Needless to say, the reasons remain the same for government as well.

What is tempting Indian corporates to temp employees?

As Indian companies get more and more connected with the global economy, they are coming under enormous pressure to push the cost down forcefully and develop their productivity and operating efficiency. Buffeted by the competitive pressure, companies are taking recourse to the temp workforce phenomenon.

Researchers have reported that some areas of the Indian economy other than IT like – telecom, pharma, manufacturing, hospitality, and agriculture has increased their hiring via temp agencies to a considerable extent.

However, it is the IT sector that has been investing substantially in its efforts to fulfill the requirement of the temporary workforce. Leading IT corporates are busy spending millions of dollars while it comes to tech recruitment via temp agencies. Take a look at the table below:

Annual Spending Companies
Over $150 millions IBM
$80 million Accenture, Microsoft, Cisco
$50 -$80 million Cognizant, HCL, Oracle
$ 30 – 50 million MacAfee, TCS, Google, Wipro, Intel, Motorola
Up to $ 30 millions Infosys, CapG, JP Morgan, iGate

Interestingly, researchers and studies conducted on Indian staffing have also revealed that due to the lack of regulations within the industry, there’s an enormous prevalence of random players who are highly active outside the ambit of the labor laws.

So, now it’s time for the Indian staffing industry to take a step forward and take proactive action regarding implementing regulations. And in this case, the ILO Convention 181 should be considered. This single move can ensure better security for the Indian flexi-staffing worker.

But why temp workforce and How do organizations benefit?

Needless to say that the increase in temp hiring or contract staffing has some substantial advantages for the organization; which is why they resort to this kind of a work plan. The benefits include the following:

#1. Reduced hiring risks

As mentioned earlier, in a volatile economy budgets are somewhat tight, and organizations need to do more with less money. Recruitment does require substantial budgeting as well as involves hiring risks. However, if an organization chooses to fish out the hiring task to temp agencies, a large chunk of the workload will be reduced from them.

#2. Cost savings

The next big advantage of recruiting through temp agencies is that the organization ends up saving a lot of money that is involved in the overall process of hiring and recruitment. Temp workforce usually comes with a fixed cost and the hiring company also doesn’t need to bear other expenses such as medical bills, travel allowances, pension plans or any other such benefits. This ends up saving a lot of money for the organization in one go. Good enough reason to hire a contingent workforce.

#3. Lower exposure to legal action

Permanent employees, whether part-time or full-time ones usually have lots of rights and protection under the Indian legal system. However, such laws are not applicable regarding temp employees. Lesser coverage to legal action implies that employers will not have to worry about any legal hassles in case they need to take any action against contractual employees. And this is where organizations tend to have the upper hand.

Needless to say, Indian corporates as well as MNCs operating in India (especially IT companies) have been smart enough to realize these benefits and hence choosing temp workforce instead of a permanent labor force.

Keeping in mind the current workforce scenario of India, it can be said that, going further substantial increase in the temporary workforce is bound to be seen. And this will only increase for the better in future. Knowing the current situation, it can be said that the overall concept of flexi staffing has a bright future in India and corporates will only continue to leverage the same.

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