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STAFFING INDUSTRY IN INDIA: Rajeev Manjrekar

The staffing industry places individuals into temporary positions (temps) or contracts in firms around the world. A “temp” is a temporary worker with an organization, who is on a third-party (staffing company) payroll.

A well-accepted norm in global companies, many large Indian organizations are now hiring a part of their workforce from employee staffing firms. The reason is not too difficult to guess—as organizations focus on their core business strengths in a highly competitive environment, the non-core functions are outsourced. The manpower for the latter is provided by the employee staffing company. The contracts can range from three to six months, and there are no hassles normally associated with recruiting and retaining people.

In the US, staffing companies placed about 2.96 million people per day and the total US market generated $91 billion. Other major staffing markets include Japan, Italy, France, Spain, as well as many emerging markets. What has been rated as the fastest growing human resource trend, the phenomenon of temporary staffing is finally catching up in India. While industry experts estimate employee staffing to be $140 billion business worldwide, the domestic staffing industry is yet to boast of big figures. The scenario is however about to change considering the fact that in the near future 2.5 to 3 percent of the workforce in the country will be hired on a temporary basis. The IT industry being a trendsetter of sorts, will witness a large percentage of such hiring in the next few years.

Temporary staffing has been growing around the world, but the US temp market has been essentially flat. In India, however following a brief period of lull after last meltdown, employers have started hiring again. Hiring was overcautious though, as businesses were taking on new practices that evaluate candidate capabilities. There are indications, however, that numbers would be stepped up from the current 11% – 14% to about 18% over the first quarter of this year as the new practices mature.

Factors affecting staffing Industry:

The demand for temporary workers has been fuelled by companies looking for greater workforce flexibility, faced with fast paced market changes, including changes in consumer demands and shorter product life cycles. The major challenges facing the staffing industry are strict labour laws and shrinking workforces in major markets due to low birthrates. The staffing market is also highly influenced by economic cycles because unemployment rates and labour productivity both have a large impact on a firm’s hiring rate.

Economic Cycles:

The staffing industry is highly influenced by economic cycles. In down cycles, firms start downsizing their workforce and there are fewer jobs for the staffing companies to fill. Temporary workers are usually the first to be cut in down cycles, but also the first to be hired in up cycles. A major reason for the growth of the temporary staffing market is because of the flexibility it allows firms.

The Economy of India is the seventh-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20 major economies, a member of BRICS and a developing economy among the top 20 global traders according to the WTO.

According to the Indian Finance Ministry the annual growth rate of the Indian economy is projected to have increased to 7.4% in 2014-15 as compared with 6.9% in the fiscal year 2013-14. In an annual report, the IMF forecast that the Indian Economy would grow by 7.5% percent in the 2015-16 fiscal year starting on April 1, 2015, up from 7.2% (2014–15)

Temp staffing offers flexibility

Labour markets as well as labourers are demanding more and more. This means that temporary workers are in high demand. Employers like temporary workers because it gives the company more flexibility in its employment options and it is a good way to find quality permanent employees down the road.

Indian industries are open for such flexibility for various reasons like: 1) To fill in for absent or temporarily vacant employees, 2) To provide extra support during busy times, and 3) To staff special short-term projects.

Labour Laws across globe

In June 2008, the EU made a directive that addressed the positive impact temporary staffing has on the labour market. The directive requires countries in the EU to make at least the minimum requirements specified by the directive. Some of these actions include banning all laws that discriminate in any way and adding a law against disability discrimination. France has already lifted restrictions on temporary placement; however, restrictions are still prevalent in other countries. In Spain, temporary staffing is prohibited in the construction industry, as well as public services (Belgium does not allow temporary staffing in public services either).

The Indian Labour laws are well defined and support the Industry. There over fifty national laws and many more state-level laws in the country.

Low Birthrates Threaten to Decrease Workforce

Staffing companies do better when a country’s population is younger, as a younger population means more consumers and workers. However, populations in many major staffing markets are getting older and birthrates are low. A birth rate of 2.1 is what is needed to maintain a population, anything below that means that the population is below replacement and is shrinking. Several major markets have this problem: France = 1.6, Italy and Spain = 1.2, Western Europe = 1.5, and Japan = 1.3. A birthrate of 1.2 means that in 20 years the working age population will shrink 30%. Many European countries are importing labour and over 50% of all births in the Netherlands will be non-European in 12 years. However, there are countries like Japan, which will not import workers. As a result, by 2020 about 20% of the Japanese population will be over 70 years old.

India has more than 50% of its population below the age of 25 and more than 65% hovers below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan.

Scope of Staffing Industry:

The positions

It is a known fact that most companies prefer temporary staff to permanent ones, furthermore there is a growing trend of outsourcing non-core functions to outsourced staff. These range from accounts, front-office, sales, marketing and back-end operations. The service spectrum caters to functional activities involving office administration, technical support, finance and HR support.

Types of services offered

Employee staffing companies offer a plethora of staffing solutions to their clients

Temporary staffing: Enabling the client to respond to short-term temporary and/or flexible manpower needs with specific skill set requirements or for supplementing the workforce. These services could be of a part-time, full-time or job sharing nature.

Temporary-to-permanent services: The client can hire associates as temporary employees for a trial period of employment; after a satisfactory trial period, a company has the opportunity to add a temporary worker to its permanent staff; by moving the employee from contract payroll to that of the business client.

Long-term contract: Corporate can opt to enter into assignments for long-term and indefinite periods of time.

Managed services: The employee staffing company can provide the onsite management of the contingent workforce at the client facility. It retains the responsibility for the supervision of the leased employees as well as the accountability for the results of the facility or function that have been leased.

Benefits to the organization

The trend of temporary staffing has been popularised in India by MNCs who have been aware of the benefits in their experiences in other countries. The opportunity to concentrate on core areas as non-core areas are taken care by experts, benefits of scale, long-term cost benefits and a responsible employer image. There is also a flexibility of employment and ease of recruitment & replacements. In addition to this the statutory complexities are also taken care of by the staffing company.

The Temps

There are various types of temps – people who want short-term options; fresher’s wanting to gain experience; experienced people for specific experience and of late even top management guys for interim management options.

Advantages of temporary staffing
  • The opportunity for organizations to focus on core areas
  • Flexibility of employment
  • Ease of recruitment and replacement
  • Long-term cost advantages
  • Benefits of scale

The future of Staffing Industry

Temporary staffing is expected to grow exponentially in the country, in the near future. “It is the quality and ease of availability of manpower that would define the role employee staffing organizations stand to play, not only in non-core functions but also certain core business areas of organizations,” points out an industry expert, adding that it is imperative for outsourcing partners to move from “only” employee staffing to complete end-to-end “activity management.” It is also necessary for outsourcing partners to be equipped with vertical and functional specialisations, with key differentiators customised to the Indian employment scenario.

In a recruitment market where the concept of full-time employment is increasingly becoming a thing of the past, temporary staffing is emerging as the viable option.

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