For years, companies such as TeamLease Services Pvt. Ltd and Ma Foi Management Consultants Ltd made their money supplying a stream of white collar workers to bridge India’s talent shortage. Now that the shortage has moved down the rung, the recruitment agencies are scaling up. At stake is the 64 million blue collar worker market.
TeamLease, which has 58,000 white collar workers on its payroll, has in the last year alone recruited 6,000 shopfloor workers whom it has placed mainly in the auto and auto ancillary sectors. It has started a contract services arm, which provides workers to around 30 auto ancillary companies as its clients.
The Chennai-based Ma Foi has 700 people in its workforce in what it terms “light industrial staffing”, out of a total of 28,000 employees.
Bangalore-based Adecco India, too, confirmed that it provided such services, without giving specifics.
“We provide them facilities from debit cards to helping them upgrade skills, so that they feel that they are part of the organized sector,” says Sangeeta Lala, vice-president with TeamLease Contract Service. “Companies are realizing that they have to bear the liability if something goes wrong, since they are the principal employer. In our case, we are the employer and manage all benefits and administration.”
With attrition rates scaling 15-20%, the auto industry is also dependent on contract workers as never before. It is a volume game for the staffing companies too. They get a fee ranging between 10 and 15% of the monthly salary for any level of workers they provide. With the average blue-collar worker earning about Rs4,000 a month, these companies get between Rs400 and Rs600 as commission per worker.
The organized sector’s fee ranges from par with the informal sector to a 15% premium in cases where they have to provide training and other services such as payroll management. But they claim that they may be able to charge lower when the numbers scale up. “If it is a sizeable mandate, then economies of scale will work,” says E. Balaji, chief operating officer at Ma Foi.
G.S. Ramesh, senior vice-president of Hyundai Motor India Ltd, India’s second largest car manufacturer, said the attrition levels in his firm stood at 11%-13%, and could rise to 25%, given the demand for trained labour in the automobile sector.
While labour is one of the most regulated sectors in India, with as many as 13 Acts governing everything from hours of work to the minimum number of cotton spools in first-aid kits in factories, companies find ways of exploiting contract labour or workers. That includes getting wages late and not providing accident insurance.
Executives in recruitment firms who did not wish to be named said while automobile companies typically advertise for their needs, only 60% of the roles are filled through the advertising. For the rest they come to recruitment firms who typically are left with little choice but to poach from rival car makers.
“There is a talent crunch in the shop floor,” said Praveen Paranjpe, head of manufacturing at Honda Siel Cars India Ltd. “We face problems getting good quality people.”
Recruitment agencies get workers through participation in job fairs, advertisements in the vernacular dailies and campus recruitment from industrial training institutes, or those colleges that train skilled workers. And increasingly, workers prefer working with them because of wage assurances and not having having to give a cut to middlemen who negotiate between them and the factory. “Here, at least I get my wages on time and there is some sort of security,” says Rafique Khan, a 35-year-old assembly line worker with TeamLease in Gurgaon.
The automotive sector alone employs 10 million workers directly and indirectly. Demand in this sector alone is expected to more than double to 25 million workers in the next 10 years, according to the Automotive Mission Plan 2006-16, the government’s blueprint for the automotive sector.
When any new player comes in, existing players will face higher levels of attrition says Dhushyanth Kumar, general manager, human resources, at BMW, which recently inaugurated a factory in Chennai, already home to Ford Motor India Ltd and Hyundai.
He also said salaries are becoming increasingly competitive in the market, which is a natural result of increasing number of players.
Collectively, India makes some 8.3 million passenger vehicles a year. But demand is not constant through the year and usually peaks in the October-December quarter, when the people buy more cars during the festival season.
Car and bike makers usually hike output just ahead of this mostly by hiring more temporary workers and using them on multiple shifts. It helps “maintain flexibility in the wake of fluctuating market demand,” says a Maruti Udyog Ltd spokesperson.
That need for flexibility is rapidly translating into more business for recruiters.
John Samuel Raja D. and Abhinav Ramnarayan contributed to this story.