In some countries, temp staffing hires almost 10% of the labor force
1,200 employement exchanges last year succeeeded in giving only 2 lac jobs to the 4 crore people registered
Around 50% of India’s youth are self employed; this is not a badge of our entrepreneurial skills as a country but the fact that we have not been able to create jobs. Deep Mukherjee, Vice President & Head Business Development, Teamlease Services, talks about temporary staffing as a proxy for job creation
India is the only country in the world getting younger. We will add 300 million people in labor market by the year 2025. This can be viewed as a demographic dividend or as a lost opportunity if we are not able to get our matching engine right. We need massive job creation over the next few years if we aspire to take up this opportunity of contributing to the global markets. We need to think of new ways to ensure job creation.
The poor in our country can not afford to remain unemployed and hence, become self employed. We often debate on the lack of social security benefits. However, if we pay one fourth of our population living below the poverty line, a benefit of 50% of the per capita income, it would wipe off our tax receipts. The only social security we can give them is massive creation of new jobs.
Temporary Staffing-A Windfall
Temporary (temp) staffing or contractual jobs will aid in large scale job creation. It is an alibi for employment generation especially in a growing economy like our’s. In some countries, temp staffing hires almost 10% of the labor force. Temp staffing companies address the issue of matching and flexibility, thereby ensuring access to the traditional labor market outsiders i.e. unemployed, first time job seekers, young mothers, thereby acting as portals by providing them not only a job opportunity, but also providing them the relevant skills and the necessary experience for future long term jobs.
The flexible work arrangement ensures higher participation by the employee towards performance and productivity.
Small and medium enterprises have a strong need for labor flexibility and account for bulk employment within a short span of time. Temp staffing companies are able to create that advantage of flexibility, turn around time and cost arbitrage. Staffing companies provide better matching of demand and supply, thereby ensuring high quality of workforce. The expectation from staffing companies has changed over time from arbitrage to liquidity. The concept of ‘just in time’ inventory applies to the workforce as well, where staffing companies supply manpower within a specific time at the location for the time period required, thereby cutting down the cost of ‘carrying inventory’.
From an employer perspective, temp staffing gives the prospective employer an opportunity to audition the candidates before making a long term commitment to take them aboard as permanent employees. It also allows companies to create a differential salary system for specialized skills, thereby not creating internal disturbance within the organization.
For start up companies, cost management is critical and more so the fixed cost of headcount. Temp staffing helps them postpone large fixed costs till the business is stable and viable for the company to do so. This helps companies to increase their competitiveness in the global markets especially when there is a competition to deliver on timelines with consistent quality and competitive cost structures.
Staffing Companies and Temporary Staffing
Staffing companies are like a bridge to permanent employment with almost 40% of the temp workforce finding permanent jobs within a year of starting as temps. The employee sees the staffing company as a springboard to permanent employment. Many staffing companies provide the employee with the necessary skill upgradation programs, specific product training, thereby increasing their opportunities in the job market. For a large number of employees, staffing companies provide them with flexibility as a lifestyle choice which permanent jobs do not. A large part of the workforce chooses temp jobs as it provides independence, flexibility and also higher salary.
Temp employees are ‘grey’ area as per the current laws. The laws need to be amended so that the issue of job creation is nurtured without changing the basic structure of the law.
Staffing companies need to be recognized as principal employers, and not the company which wishes to hire temp workforce. We need to allow contract/temp staffing in all functions/industries, and not restricted by the definition of non– core which is subjective. We need to create a national license and move away from contract-to-contract which is the norm currently. PF and ESI should be applicable only after six months, thereby restricting almost 40% confiscation of salary for services which the employee seldom uses in temp jobs.
Employment exchanges need to see themselves as career centers. Till date they have not lived up to the objective of their existence. 1,200 employment exchanges last year gave 2 lac jobs to the 4 crore people registered. Employment exchanges need to be adopted by private partners who can run the same in a more efficient manner.
Apprenticeship as a Means for Employment
Apprenticeship is a powerful tool for an employee to earn while he learns. Yet, the apprenticeship act of 1961 restricts this practice to a static list of 254 industries and 127 trades. It also does not include many new businesses or functions in the current economy. The minimum duration of 1 year results in high drop out rates and restricts commitment by the employer. The act restricts where the apprentice can be located and prescribes random ratios for the number of apprentices which the employer can hire. India has only 2 lac apprentices, Germany has 6 lac and Japan 11 lac. It is definitely an opportunity wasted in creation of jobs.
It is now commonly used as a strategic tool for risk management and improving productivity of capital. Temp staffing now is a balance sheet item. Currently estimated size of flexi staffing market: US$ 150 billion concentrated in US, France, UK, Netherlands, Japan, & rest of Europe. It is not rare to have companies with temp workforce as high as 70%.
As a concept, temp staffing started in the US in the 1930s; a form of employment that provides flexibility to both employers and the workforce. It is a misnomer that temp staffing is a by-product of unemployment; on the contrary, it reduces unemployment.