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Our Bureau

New Delhi, Sept. 1 The attrition in the Business Process Outsourcing (BPO) industry is roughly 7.8 percentage points higher than other sectors, a report by global management consulting firm Hay Group said on Monday.

While the staff turnover in India stood at 15.7 per cent, at BPO companies the attrition is the country’s highest at 23.5 per cent, followed by communications (22 per cent) and retail (18 per cent).

The report ‘BPO Special Sector Survey 2008’ notes that remuneration structure design was not as attractive when compared to other industries in India, leading to higher employee churn in BPO companies. Short-term incentives account for only four per cent of total remuneration, compared to 10 per cent generally – benefits are limited to those that can be enjoyed only post-retirement, such as pension fund and gratuity, and not during the employment period.

“From our analysis, the overall compensation structure design is not competitive when compared to general market practices. This means that BPO employees do not receive as much cash-in-hand as their peers in other industries,” it said. This compounds existing issues such as working shifts, lack of career development initiatives, and at times monotonous tasks.

“Contrary to belief, adjusting pay need not automatically lead to higher operating costs for BPO companies.

By creatively designing their total reward package towards more short-term incentives and benefits, and linking the package to performance, companies can ensure that they get higher productivity without hefty increases in salary costs and minimise attrition costs and issues at the same time,” Mr Oscar De Mello, Country Head of Hay Group’s Reward Information Services in India said.

The report also recommends planning a more robust combination of short and long-term incentives, such as performance bonus, Employee Stock Option Plans (ESOP), deferred and retention bonus, that meets the aspirations and needs of their young employees so as to drive performance and improve productivity.

When contacted, Mr Avinash Vashishtha, CEO and MD of outsourcing advisory firm Tholons, said that high attrition had led to productivity losses and negative impact of quality for the industry in the past, but situation was changing.

“A significant amount of European BPO work is going to Eastern Europe where the effective cost do not vary much compared to India, but the productivity is higher and so is the quality… Also in the backdrop of the slowdown in the financial services market in the US, and the resultant impact on the demand, the attrition rate has started to come down.”

More Stories on : Outsourcing | Human Resources

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