Rising demand, escalating costs: staffing firms feel the heat

Demand for gig workers from companies in consumer, banking and logistics sectors has risen 15-20% in tier II and III cities, but staffing firms said they are hobbled by a rise in cost of relocation of workers from different states, as well as high attrition—sometimes a temp worker may last barely a month, necessitating the added cost of a replacement.

“There is a 20% increase in costs in a year’s time along with an attrition of at least 25%," said Sunil Chemankotil, country manager of staffing firm Adecco India. “This means when we get a workforce from other states in northeast or central India to one of the southern states, the workforce stays for a few months (only). We then have to get replacements, which leads to more costs since we cannot bill the client again."

The problem is more for industries like manufacturing, which no longer want cheaper talent from other states. “Clients want local talent and not depend on manpower from other states," Chemankotil said, adding that local talent is scarce and expensive in many states, “which makes hiring tougher now".

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There are other ground-level requirements as well. Lohit Bhatia, president-workforce management at Quess Corp, one of the largest staffing firms, highlighted that India's villages are feeding into the demand for workforce in the cities. However, recruitment vendors have to ensure food is provided for and there is sharing accommodation as well.

“There will be a 25% uptick in hiring this summer versus last year," Bhatia said. “But the costs for procuring manpower have shot up by 10% in the same period."

The hiring challenge comes at a time when India Inc wants to make up for a weak festive season by pushing for a successful summer sale.

In India, the festive period—September-December—sees maximum sale of products, and highest demand for sales, marketing and feet-on-the-street employees. Numbers reach the peak during the Diwali period (typically October) for companies in consumer, retail, logistics, e-commerce, insurance and banking sectors.

Summer season comes second in terms of demand. Hiring for temporary workers, who are recruited for three to six months, starts March onwards. Demand for cooling appliances and colas as well as ice creams typically picks up from March till late June.

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Rising summer demand

This year, barring a spell of rain in parts of south India, companies selling air conditioners and coolers have said demand is strong. This is driven by both first-time consumers as well as replacement purchases.

Mint had reported earlier this month that several cooling appliance makers had stepped up advertising budgets and launched new products in the market, with Samsung saying its AC business doubled in the March quarter versus a year ago, and Godrej Appliances expecting a 50% jump in AC business this summer versus last year.

“The summer season is quite strong, so we definitely will see a 15-20% jump in hiring from the air conditioner and cooler retailers," said Balasubramanian A., senior vice president and business head at TeamLease Services. “The hiring also happens in two phases—one is in February-March for selling air conditioners; the second is toward the end March and April for servicing."

Balasubramanian added that compensation for gig workers will go up by 6-10% this year, much in line with increments seen in the past two years.

Ratcheting up the demand for gig workes are quick commerce companies like Swiggy and Zomato, which are expected to see higher growth this summer after having expanded to smaller cities. Technicians and sales people are in high demand, especially for cooling products and services.

Also read | Quick comms brace for higher churn of dark store workers amid rising competition

Queries sent to Zomato and Swiggy remained unanswered.

Meanwhile, distributors of fast-moving consumer goods said sales of drinks and ice creams remain strong following attempts by companies to lower price points.

“While we already have a developed infrastructure to cater to this high demand each summer and our network has high manpower, we do hire more feet on street as deliveries and demand for such products go up during peak months," said Dhairyashil Patil, president of All India Consumer Products Distributors’ Federation.

“One reason why companies are hoping for more footfalls in stores will be the increased discretionary spending after a tax rebate in this year’s budget," said Satish Meena -founder of Datum Intelligence -a market research firm tracking consumer behaviour. “A ₹10,000-15,000 increase in customers’ budget will lead to higher demand for summer needs like ACs etc., which in turn will lead to demand for more manpower."

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However, Meena added that while companies grappled with supply-chain last year lag as summer came early, they will want to be better prepared this time.

For companies, hiring temporary workers is also cost-efficient. The workers are recruited by the vendor and the compensation depends on the states they are working in and the skillsets they bring in. Over and above that, bonus for extra hours is offered.

The vendor in turn bills clients based on the number of people hired, logistics, and the cost of the skillsets being made available.