The Hindu Business Line : Start... Stop!

Manpower is a critical but expensive commodity in the IT and ITES industries. Having just enough and no more is an ideal most companies haven't really thought of. But that's changing, with HR outsourcing. eWorld tracks the `HR on demand' scene .

IF body shopping buttressed the 1990s' boom of the Indian IT industry, business process outsourcing (BPO) has fuelled its success over the last few years. And despite the outcry against outsourcing to India, the trend continues.

And a new concept is now gaining ground in the Indian outsourcing market thanks to greater offshoring by MNCs to the Indian software industry.

The `temp' culture that exported many skilled people from India to the US to work with firms such as Microsoft, Cisco and GE as temporary workers is on the upswing back in India. Employee leasing is rapidly changing the way corporate India does business.

If you think this is body shopping in a new avatar, think again. A `temp' is a temporary worker who works with an organisation but actually is on the payroll of a third-party staffing company.

"Temp staffing was in vogue in the US earlier. Due to offshoring, the trend is on the decline there, while the reverse is happening in India where the volumes (of IT professionals) required by the Indian IT segment have increased, consequently giving rise to the need for temporary staff," says Gautam Sinha, CEO, TVA Infotech.

As Indian businesses come under pressure to scale up operations, they are hiring skilled manpower in large numbers from several staffing companies for temp positions ranging from sales executives to vice-presidents and CEOs.

While HR outsourcing firms such as Kelly, ManPower, Adecco, Randstat and RobertHalf have capitalised on this factor internationally, closer home, companies such as TeamLease (TL) and TVA Infotech are trying to create greater awareness about the benefits of leasing employment and HR functions in the Indian IT industry.

The whys and wherefores

The human resource expertise required to manage a small to mid-sized business is outgrowing the experience and training of many entrepreneurs who started these entities. Firms now feel the need to divide the `business of business' into manageable parts along with a need for small businesses to achieve economies of scale. Moreover, with Indian professionals getting savvy about their right to quality, affordable healthcare, retirement savings plans, and other employee benefits for themselves and their families, professional HR management has become essential.

In response to these demands came the evolution of the professional employee outsourcing industry wherein the HR responsibility of the placement firm goes beyond sourcing the right candidate for the right job.

The cost to company (CTC) is driven by the market demand and supply ratio. A third party HR vendor like TeamLease charges a service fee of 10-20 per cent, in addition to the remuneration (salary to the hired employee) paid by the company.

"There are no hidden costs involved when a company uses a third party vendor for its HR requirements since the tri-party agreement would be drawn between the corporate client, employee and the staffing vendor," explains Ashok Reddy, Managing Director, TeamLease Services Pvt Ltd. The service charge is driven by volumes, employee expertise and locations serviced by the vendor. While the US leads the human resource outsourcing (HRO) market with an estimated opportunity of $76 billion, the global HRO is pegged at $140 billion.

While internationally the HRO concept has been quantified as giving a 30-40 per cent savings to HR departments, closer home the benefits from HRO seem to have made good business sense for IT bigwigs such as Oracle, TI, MindTree Consulting and Reliance Infocomm which have utilised temping staff.

In a survey conducted with select corporates by TeamLease, it was found that labour reforms will help companies hire 4.8 per cent more workers as temporary staff while the overall outsourcing would decrease by 1.5 per cent.

This refers to changes made to the Contract Labour (Regulation & Prevention) Act in order to allow companies to hire employees on temporary contracts without the threat of having to hire them on a permanent basis.

In such circumstances, companies would have less incentive to use outsourcing for `regulatory arbitrage', and will be inclined to hire temporary staff, especially within the client company's premises, points out Reddy.

This applies for temporary staff hired for specific occasions like increased production, changes in demand and month-end/year-end processes, etc as well as staff `leased' on longer term contracts from a staffing company.

India is yet to evolve into a mature HR market but statistics are encouraging. "HR Outsourcing will be a good business opportunity. However, within the country the prospect does not offer cost advantage, but in the US and the UK, it is really taking off," opines Arun Tadanki, President & MD, Asia, Monster.

Industry experts aver that in India the employment potential on temp basis is 8 to 10 million people. "Temp staffing will increase here given the rapid ramp-ups of MNCs here. Even though the Indian IT industry has been slow (to adopt temp staffing), certain functions on the software development and support side like code writing, network, system and database administrators will see a lot of movement," says Sinha.

Going by the plans outlined by TeamLease, HR outsourcing seems to offer a big potential for firms ready to cash in on the opportunity. With partners like Monster India and Jobstreet, TL has ambitious plans to spread its associate base (temp staff on the payroll of TL) from the current 4,200 to 12,000-14,000 people by the year-end and close revenues for the fiscal at Rs 60 crore (as against Rs 10-12 crore in the previous financial year.)

What do the companies going in for temp staff feel about it?

K. Venkateshan, Associate Director-Finance, MindTree Consulting Pvt Ltd, says, "We have 10 people as temp staff doing routine work for us. Even though the cost benefit as such is minimal, there are savings involved since we can use our employees (on company rolls) to work on software development and other projects."

Temp staff work on routine jobs in finance and operations like accounting and voucher entries.

Besides the savings on cost, the company does not have to worry about issues like their (temp staff) career prospects, growth in the company, salary hikes, etc since all this is taken care of by the third party (in this case TeamLease), he says.

Picture: Bijoy Ghosh

Graphics: K. Balaa

preetim@thehindu.co.in

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

Stories in this Section
These frills must go

A spam-cleaning perk?

Give push, won't roll

Quizz

From bytes to business

Cartoon