The Hindu Business Line : The flip side...

Rajendra Kumar, a 40-something accounts executive, was employed with a leading textile company in Chennai till a couple of years ago. All was well with his job till the company decided to outsource its non-core competencies like accounting and other functions. It started reducing its staff strength considerably, as it proved profitable to cut costs by outsourcing its non-core functions. "The company was ready to retain employees who were ready to work for a drastically lesser pay," says Kumar.

K. Usha, also in her late 40s, had a similar experience. She received the pink slip just as she was going to complete 25 years in her small-scale manufacturing organisation. No longer did the products made by her company sell... they were jeopardised by cheaper Chinese products coming in post-liberalisation.

But the firm gave her an option; she could join the division that had started doing outsourcing for another large concern, but the pay packet would be leaner and the job on contract. "I had no choice, I'm on the wrong side of 40," says the woman who accepted the job.

How do companies benefit by outsourcing? Kumar says when companies outsource, they need not pay benefits such as bonus, LTA, medical reimbursements, etc that they are required to offer by law to regular, full-time employees. "And the pay is also lower. This way, companies are able to cut costs by about 40-50 per cent." Even functions such as production, operations, logistics, marketing, etc are being outsourced, apart from the usual financial management and administration work.

K. Pandia Rajan, Managing Director, Ma Foi Management Consultants, Chennai, agrees that companies are indeed "squeezing out" people in the 40-plus or early-50 category. This is happening most visibly in the banking sector. He says that in the evolving economic paradigm, the size of the organisation plays an important role, along with advancedtechnology. Thus many organisations have opted for de-layering or squeezing out mid-level managers.

People who lose their jobs due to outsourcing are the ones who have years of experience in their respective fields. Ask Kumar how the job market is for people like him, and he says: "The job market is flooded with young people. Every year, the number increases, thanks to the hundreds of educational institutions. Even those with engineering and management degrees are ready to work for a paltry Rs 5,000. Whereas people like me with 20 years of experience would expect at least Rs 15,000 per month. It is only natural for the companies to prefer young graduates who do not demand much."

Usha has much more to say. Being the sole bread earner of the family she doesn't have many choices before her. "One is never sure how long a contract job in an outsourcing outfit will last. I'm always on tenterhooks," she says, detailing her responsibilities that include her daughter's marriage.

So experienced people like her are forced to take jobs at salaries not commensurate with their educational qualification or work experience. Many of them work for agencies providing outsourcing services for larger companies. "We are almost like temporary staff as we're not on the payroll of the company, working only for the agency. So there are no perks or allowances. We work for a meagre pay, almost one-third or half of that in our previous job, and with no job security. The situation is very grim," says Kumar.

In the outsourcing industry, jobs requiring software or related technical skills get good salaries. Other jobs in the accounting or marketing fields are not so lucrative. Only the companies stand to benefit most by outsourcing," says Kumar.

Dr Thara Srinivasan, a Chennai-based psychiatrist and Director, SCARF (Schizophrenia Research Foundation), says more people are getting affected psychologically because of this middle-age crisis.

"Middle-aged people who have lost jobs to outsourcing often tend to compare themselves with their friends or relatives, who have opted to take VRS and lead a comfortable life with their retirement benefits. This crisis extends to their families. Their children's prospects get affected too, because the head of the family has lost a job," she says.

Trade unions too are directly affected by the concept of outsourcing as their membership suffers a dip every time jobs are axed.

Organised labour

Organised labour has shown a dip during the last couple of years. The economic decline, closure of industries, automation and the introduction of voluntary and compulsory retirement schemes have cut down the strength of unions. The "outsourcing" trend is only likely to add further momentum to this process.

But the first reaction of A.K. Padmanabhan, National Secretary, Centre of Indian Trade Unions (CITU), is surprising. "Outsourcing is nothing new. The engineering and auto industry have always done this; their components are outsourced from ancillary units."

So is there a big fuss about nothing?

"What is happening now is that even what was regarded earlier as `core' is getting moved outside. Earlier only utility services such as housekeeping, canteen, cars, among others, were outsourced. Now even essential activities such as basic production and important jobs such as tool room maintenance are outsourced. Further, companies actively encourage the movement of whole sections of work outside with a view to saving on overheads. Many send their officers away on a VRS and then ask them to take a contractual job — they farm out the regular work that the officer or his department was doing earlier," he says.

His colleague, A. Soundararajan, General Secretary, Tamil Nadu State Committee - CITU, chips in, "Outsourcing is nothing but exploitation of labour extended outside."

Very often companies that want to reduce costs and cheat on taxes and statutory obligations decide to move their work outside, he says, showing newspaper clippings citing the need for "flexible labour laws".

"What kind of flexibility do they want? Many companies just want to escape their responsibilities inside the factory, such as safe working conditions, separate rest rooms, proper ventilation, proper canteen or medicare facilities. They are also reluctant to fulfil statutory obligations like provident fund, gratuity, which is why they push work out," says Soundararajan.

"Why go that far? Many companies are reluctant to pay even the minimum wage under Statute," adds Padmanabhan.

He cites the instances of a number of new textile mills in areas such as Dindigul, Erode and Udumalpet, where the workforce is simply classified as "apprentices". By this simple and dubious expedient, owners pay workers less than the prescribed minimum wage, he says.

How do unions plan to combat the trend of outsourcing? Says Soundararajan, "We want to take up the issue with the Government. It is not doing enough to implement existing labour laws. We would like a law that forces employers to seek government permission before outsourcing is done."

Padmanabhan sounds a note of alarm at the repercussions of outsourcing. "We think that the Industrial Relations scene today in the country is reaching the situation that prevailed in the early 20th century before the enactment of a number of labour-friendly laws. We are going back in time. There is need to tighten and reform existing acts."

He says the International Labour Organisation (ILO) is also seized of the issue of reduction in the quality of employment and has been discussing this in its annual sessions. Withdrawal of existing benefits, poor service conditions, poor work environment, longer working hours, removal of workers from regular employment, which forces them to take up two or three casual jobs, are symptoms of the problem.

"We think that the outsourcing trend seriously negates the quality aspect of employment and causes morale problems among employees."

So what is the outlook for the future? Unions say they will launch an awareness campaign and also petition the Government. Padmanabhan also draws comfort from a few cases where a reversal in the outsourcing trend seems to be happening.

"The wheel is turning a full circle. We have noticed that the Tirupur textile units are now getting integrated under one roof under pressure from foreign buyers. The need for quality control and checks is now forcing at least a few manufacturers to reduce their tendency to outsource and rely on in-house services."

Picture by Ramesh Sharma

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Youth take the call

The flip side...

Yes, ma'am

Outsourcing Jeeves

An endangered species?

23 adversities a day!

Bank Profits Outsourced

The inside story

Earning their degrees

Bangalored!