Temping - What is tempting the Indian Companies to temp?



What is temping or temporary staffing?
Temping is nothing but injecting liquidity into the resident job market. To put it succinctly, temping is nothing but hiring workers for a specified duration or on a project – basis, rather than recruiting them on a permanent basis. A temp is a temporary worker who works with a client company, but is on the pay roll of a third party staffing company. Temping is a tri-party agreement, between the client company, the third party vendor and the employee (also known as associate or temp). The temping basically operates on 2 revenue models. The temping agency mainly receive a percentage of salary accounting for 10-20% in addition to the remuneration paid to the employee or get a fixed fee per month for every employee placed. The temp workers work in the facility of the client companies, but receive salary and benefits from the temp agencies. 

Executive and professional temps accounted for 11% of the temp workforce, according to the latest data from the U.S. Bureau of Labor Statistics. Temporary executives are usually hired to handle crisis situations, organizational transitions, or strategic shifts. According to a recent Wall St. Journal article, seasoned top-level executives command up to $2,500 per day in the U.S.

What Is A Temp Agency?
Today, many businesses that have high-traffic seasons or cyclical work schedules are looking to temp agencies to outsource short-term jobs and projects to knowledgeable individuals looking for work. These, short for temporary work agencies, provide businesses with workers on a case-by-case basis to perform the necessary tasks at the business's most crucial times. They also provide a cost efficient way for companies to conduct business without having to hire a full-time staff. Due to the nature of their work, most hire workers in the fields of health care, accounting, technical jobs, or secretarial positions. Although, there are some agencies that hire substitute teachers and day laborers for short-term work.

Size of the temporary workforce in India
Of the 400m employable in India, about 10% are employed in the organised sector, and while about 250m are self employed. This leaves almost 110m who are employed by the temp and the unorganised sector. The Federation is working towards growing this market.

Temporary staffing is fast emerging as a key hiring strategy of Indian companies and the segment is poised for strong growth over the
next five years. Temporary staffing has become a key hiring strategy for Indian companies due to less obligations towards the employees from employers. Indian information technology sector has highest temporary staffing when compared to the other industries in India, out of total workforce in India 90% workforce are temporary. Indian starting federation (IFS) an apex body for temporary staffing said that the temporary staffing is growing at a rate of 35 to 40% despite the economic downturn in India. in fact economic slowdown is one of the major reason for adopting temporary staffing in industries, economic slowdown which mean fall in the economy or decrease in business, therefore temporary staffing has become a alternative solution for choosing temporary staffing instead of permanent staffing. Compared with permanent staff, temporary staff is paid less remuneration, less benefits and ultimately employer has the option to terminate them at any point of time unlike the permanent staffing.

Similar to that of private sector in India, government sectors are also following same path as private sector in selecting temporary staffing due to aforesaid advantages towards employer. As that of private sector it is not so easy to terminate an employee working in the government sector once he gets recruited. Terminating an permanent employee working in government sector is very difficult, prescribed procedure should be followed and many benefits should be given to an employee by  the government which includes monitoring aspects calculated on his salary by following the procedure and the formulas of labour laws. But in the case of temporary staffing there is no need to follow all these rules and regulations prescribed according to the labour laws. whatever the government sector before going to recruit temporary staffing, it is clearly stating the terms and conditions of the temporary staffing which includes remuneration, term of contract of employment or date of employment may be continued and thereafter can be terminated, procedure for termination from employment by giving notice in advance, et cetera.
Festive season demands mainly temporary staff
Sellers of commodities are recruiting temporary staff instead of permanent staff  for the purpose of sales job during this festive season. High competition lead to decrease in margins and environmental factors causing increase in the cost forcing the recruitment of temporary staff for this period.

Source:Times of India-  23-11-12 


Indian Staffing Federation (ISF)was set up by leading staffing companies in India with one common goal - Staffing India's Growth. Indian Staffing Federation, an apex body of temp staffing firms in the country. 

The Indian flexible staffing industry is expected to grow from 1.3 million to 9 million and represent 10 per cent of organized workforce in the country by 2025, according to a report by Indian Staffing Federation (ISF). 

Objectives
Promote Staffing as an effective enabler of socio-economic growth
Staffing is an enabler to provide social security and long term medical, and retirement benefit to temp staff. Promoting staffing therefore will address various issues of employment benefits being provided to employees.

Develop Staffing Industry as a choice of employment

A temp job is still considered as a taboo by our society. The type of the job, the temporary nature is considered equivalent to a transitive state as compared to western societies. Changing this orientation and promoting staffing as a choice of employment will be an additional objective of the Federation.
Ref:indianstaffingfederation.org/

What is tempting the Indian Companies to temp?

As Indian Companies get increasingly connected with global Economy, they are coming under immense pressure to push the cost down vigorously and improve their productivity and operational efficiency. Buffeted by the competitive pressure, companies are taking recourse to the temping phenomenon.


In a report by Indicus Analytics, which did the research for the study, retail, telecom, manufacturing, pharma, hospitality and agriculture have been found to increase their intake of part-time employees over last few years. India, according to the report, is amongst the top 5 nations in terms of flexible manpower strength but lowest in terms of penetration since only 0.32% of the workforce base employs them.

"The survey has also brought to light that due to lack of regulation specific to this industry, there is a huge prevalence of unorganised players who are playing outside the ambit of labour laws. Hence the time has come to take proactive steps to regulate the flexible staffing industry, as a first step India should seriously consider ratification of ILO Convention 181. This single move can provide higher security and protection to the Indian flexi worker," said Rituparna Chakraborty, vice president, ISF. The study also showed that flexible staffing is applicable mainly in the lower order of workforce and specially in areas like data operations, accounts, sales, back end operations, administration and marketing.

Around 27 per cent of Indians work as flexible staff because of lack of other opportunities and take home an average salary of Rs 10,000 a month. The study also showed 82 per cent of this workforce is under the age of 30 years. The study looked at growth drivers and prospects, its benefits to employers, the challenges involved, the regulatory scenario, some internationals trends and ISF's recommendations for the betterment of the industry.



IBM is the biggest spender on IT contract workforce hiring in India, and the spend is almost double that of the next biggest spenders. The New York-based technology company spends over $150 million annually to hire contract IT staff, which as per estimates translates to more than 15% of its overall workforce.

Accenture, Microsoft and Cisco spend over $80 million each on maintaining a vast pool of contract workforce, while Cognizant, Oracle and HCL Technologies shell out over $50 million each to augment their IT staff with contract resources that work as an extended IT team. These contracts can last for three months to a year on a project basis and skillsets that are commonly outsourced include Java /J2E, testing and data-warehousing where employees get paid on an hourly basis.


Globally, the IT staffing market is a whopping $180 billion industry. India's has grown from a modest $700 million in 2011-12 to about $1.2 billion in 2013-2014. Statistics from the Indian Staffing Federation (ISF) showed that industry employs 1.7 million flexi workers in India. The ratio of flexi staff to work force is 0.43%, considerably lower than in the US (1.8%) and Europe (1.6%).



Facts [+]

IT, retail companies hiring more temporary employees: May, 2012

Companies across the information technology (IT), IT-enabled services and retail sectors are hiring more temporary staffers, shining a glimmer of light in a bleak economic scenario. At the same time, they are moving with caution, cutting the number of permanent employees on their rolls and running multiple checks before they hire.

Companies can take in temporary hires with every spurt in business, but if things become difficult, they will not renew contracts.

The temporary staffing business in India is pegged at around Rs. 3,000 crore while the permanent staffing business is at nearly Rs. 17,200 crore. The global temporary staffing industry is at around $140 billion. "Temporary growth takes place where there is a need for maintenance and sustainability, but when there is growth in industries and greenfield projects, the demand is for permanent employees," says a senior Randstad India executive who does not wish to be named.


Temporary staff - the in-thing in IT companies

BANGALORE [India], 2012: The number of temporary staff employed by tech firms has gone up dramatically in the past two years. In fact, they've been quietly hiring more temp staff for many quarters now. That's the key reason why they don't talk about well-stocked benches (bench refers to employees not currently on a project).

Temp workers account for 10% to 15% of the actual employee base of IT companies today, against 2% to 5% a few years ago. This share is expected to go up to 20% to 25% in the coming quarters, say temp staffing experts.


A quick check run by the Indian Staffing Federation, an apex body of temp staffing firms in the country, among its eight key members at its recent board meeting indicated that the demand for temp staffing by tech providers would go up by 40% to 45% in the next couple of years. Mafoi Randstad, TeamLease, Kelly Services, Adecco India, Manpower and GI Staffing Services, Alegiss and Global Innovesource are the leading players in this space which includes 20 small and medium firms too.

Domestic companies didn't believe much in temp staffing until recently. Temp staff account for 20% to 25% of the global workforce. This is having a rub-off effect on their Indian counterparts, say staffing experts.

Executive and professional temps accounted for 11% of the temp workforce, according to the latest data from the U.S. Bureau of Labor Statistics. Temporary executives are usually hired to handle crisis situations, organizational transitions, or strategic shifts. According to a recent Wall St. Journal article, seasoned top-level executives command up to $2,500 per day in the U.S.


Temping allow the companies to hire people who are already skilled and experienced. This relieves the temping company of training burden and lessens the attendant cost. So Bharati telecom, which has hired tens of thousands of temp workers, can concentrate on building up its new mobility solutions rather than getting exercised about hiring sales personnel. Fifthly Temping allows more elbow room for the companies to scale up their employee count and still keep its cost structure on a light leash . According to a recent study, cost per hire of permanent employees works out to Rs8000-Rs12000 which is quite higher than having the temp workers. So temping gives the company a decisive cost advantage Companies treat temping as a testing tool to source permanent employees. Many companies maintain a good mix of temp and perm and converts some of the good temporary employees into permanent one.

In u.s.a, the conversion rate is 4 to 5% where as in India, the conversion rate is much higher. Holding a permanent job is something germane to Indian psyche and therefore employees treat temping as a path to permanency. At the end of it all, companies take the tempting route to infuse a greater degree of discipline and prudence in managing their finance.


Temping Advantages
Contract hiring provides quick access to skilled technical resources and is a cost-effective alternative to supplement existing IT staff without incurring recruitment or training costs.

Temping offers advantages to both the employees as well as the company

From the employees' standpoint:
  • Temp employees can gain hands- on experience in their chosen industry or in different field.
  • Temp employees can get an inside track about their chosen field instead of hearing or reading about it.
  • Temps can catch a glimpse of different industry and functions and see for themselves how the industries work and functions performed.
  • Temp employees get an opportunity to learn new skills on the job.
  • Temps also receive training in new skill areas.
  • Since majority of the temping jobs are at the low-end, the temps get an opportunity to learn the job functions from ground up. Temps will have a greater grasp over the rudiments of their job which will be quite critical as they build their career and inch their way in to a permanent position.
  • Temping offers an opportunity to the employees to explore different areas of a job function without making any long-term commitment.
  • Temps can earn a decent salary. According to a recent estimate, average salary for the employees in the low ranges is around Rs. 7500 per month. For middle level, it is Rs. 35,000 and at the senior level the salary can ratchet up to as high as 4.5 lacs. In the case of time-bound projects, temp command more salary than the permanent employees. According to another study as quoted by the economic times, the salary increments for temps are moving south wards. Salary increment for temps in the manufacturing sector has gone up from 14% in 2005 to 17% in 2006 .As against a hike of 20% in salary. In the IT and ITES sector for permanent employees, the hike for temps hovered at 17% in the corresponding period. Besides temps remuneration is linked to the number of hour's temp work. If they work for more hours, they can earn quite an amount.
  • When temp work for top-notch, blue-chip companies, they have the advantage of working for a better brand which gets reflected on their CV's.

From the company standpoint
  • Temping arrangement helps company to acquire the decisive cost edge.
  • Temping allows for flexibility of employment. According to the study conducted by a consulting firm Delloitte and Touche, 6% of the employers use temps to reduce wage costs, 63% of employer hire them to match the seasonal spike in demand, 59% to cover for holiday/sick leave, 39% to cover for maternity leave, 21% hire temporary staff for specialized skills and 20% hire temp workers on a trial basis so that they can be absorbed in to permanent positions.
  • Ease of recruitment and replacement: companies hire temps in the wake of surge in demand for the products and service. companies can also cut back the employees when it goes through a lean patch.
  • Company need not bother about issues such as motivation, career planning, and performance evaluation to temp employers. They are the headache best left to the staffing agencies.

Disadvantages of temp jobs


From the employee's standpoint
  • Looming threat of job insecurity
  • No benefits and holiday
  • Temps may witness of lot of gaps in their employment
  • Temps will have to do the routine, mundane and monotonous activities.
  • Temps may expect the marching orders without any notice at all.
  • Some companies tend to treat temps as a second class citizen. The exploitation of temps in the client companies are quite common.
  • What was meant to be job to gain experience can become a full-time career if temps do not strive hard to become a permanent employee. Employees tend to become blasé and lazy about job search.
From the company stand point
  • Companies will find it tough to maintain their culture in the event of large proportion of temps working with the permanent employees. Temps do not feel committed to the culture of the client company.
  • Temps may not inject same level of motivations, sincerity and energy as permanent employees do.
  • Company will have to depend on the staffing agency to provide the temps it needs. Staffing agency may provide the client company with temps who may not fit the needs of the client. Consequently, the client company are saddled with more work and no good worker.

Pre-requisites to make temping a tempting option

  • Any progressive company should not discriminate between temp and permanent employees. In many companies the office furniture are treated with more respect than temps. Though the temp jobs do not carry the stigma any more, the isolation if temp in the company is more pronounced. The temps are still perceived to be the rank outsiders by the perms. Employee – friendly companies that uphold human values and dignity should obliterate all signs of discrimination against temps.
  • Channels of communication should be opened between employers and temp workers about standards of performance, actual performance and feed back about the scope for improvement.
  • Employers should device appropriate reward and recognition systems for temps as well.
  • Employers do not provide any training to temp workers as they do to the permanent workers. In case if they notice that the hired temp lacks the skill sets they are expecting, they may ask for quick replacement from the staffing agencies. By and large, the training is provided by the staff agencies. Temp agencies, keen on building up a viable temping model should commit its resources, and energy to train the temp workers. Apart from service, it is the training which will be the key differentiator in an increasingly crowded temp market. Manpower Inc., a leading global player in temp business has a learning centre that offers 4000 courses on-line to its temporary staff. Once the temp complete their courses successfully, they receive certification from the agency. This certificates lend weight to the temp's resume.
  • Employers should devise schemes for the temps that are in line with that of perms.