Large staffing companies seek better regulation

Proliferation of small, unrecognised firms in the industry seen hurting the structured growth of the sector


Pboto: Mint
Pboto: Mint

New Delhi: The $4.5 billion Indian staffing industry has written to the government seeking better regulation of staffing companies through a licencing system, among other measures.

The Indian staffing industry, vital for moving the informal workforce to formal career options, believes that growing informality—the proliferation of small, unrecognised companies—in the industry is hurting the structured growth of the sector as well as meaningful job creation.

Leading staffing companies including Teamlease Services, Manpower Group and Innovsource Pvt. Ltd have urged the labour ministry to help restrict the informality in the sector which is hurting young career seekers.

“When others are going away from licence, we are saying a national licensing regime is required. The sector needs government intervention and regulation,” said Rituparna Chakraborty, president of the Indian Staffing Federation (ISF), an association of leading staffing companies.

Chakraborty, who is also senior vice-president at Teamlease Services said that while seeking more regulation, they have urged the government to ratify the International Labour Organization convention 181 that recognizes the importance of “flexibility” in the functioning of labour markets and thus, the role played by ‘flexi staffing’ in jobs.

Raja Sekhar Reddy, chief operating officer of Innovsource, said that while staffing companies, especially the established ones are promoting formalization of the workforce, there are many in the sector who are small fragmented players and operating informally.

“They harm not only the economy but also the workers’ interest,” he said.

According to staffing industry estimates, there are 28.4 million temporary workers in India in the formal workforce.

Of these 28.4 million, only 2.1 million are those hired through a formal tripartite route managed by the bigger staffing agencies. It means the majority of temporary workers are being managed by small, fragmented players.

“The opportunity in India is immense. We are enablers in the job market and are looking at the government on how they tackle the issue for betterment of workers,” said Hans Leentjes, vice president (external affairs) at Manpower Group.

The flexi staff workforce has increased to 2.1 million from 1.7 million in 2015 and 1.3 million in 2014. Organized staffing players believe that established players are working as effective enablers of socio-economic growth. The industry is growing at a healthy pace and is expected to deploy 2.9 million flexi staff by 2018.

In 2014-15, the staffing firms contributed Rs.1,200 crore to employees’ provident fund (EPF), Rs.450 crore to employees’ state insurance companies (ESIC) and Rs.1,400 crore to the government in service tax.

“It means we are providing social security to workers and revenue to the government,” Reddy sad.

Chakraborty said ISF wrote to the labour ministry sometime back and that the ministry is looking at the proposal “pro-actively”.

The 20-plus leading staffing companies have written in their memo to the labour ministry that “freedom of establishments for contract staffing companies should be enshrined. However, in order to contribute to the sound development of their activities, a system of licensing certification, inspection or registration may be established, provided that such systems are proportional, non-discriminatory and objective and do not aim at hampering the development of the private employment agency industry.”

A labour ministry official confirmed that such a letter had been received by the ministry.

“They argue that mom-and-pop shops in the staffing space are controlling the industry without enough accountability. We think they have a point as workers’ welfare is key in the labour market and such informal players are not good for workers’ safety and security, leave alone ensuring human resource competitiveness for companies,” said the official.

However, the official said, there is a point of concern about the industry proposal. “If you accept their proposal as it is, it means creating a centralized hiring system of flexible workforce. But the good point is, it will ensure a better job and salary security for youngsters,” the official added.

Chakraborty said that government should not allow anyone to operate in the staffing sector without a licence, which should be renewed every three years based on “clear deliverables and performance”.

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