India to become third-largest employer of flexi-staff by 2018

While hiring has been constrained across sectors, the industry has annual growth rate of 12-15%

Come 2018, India will become the third-largest employer of flexi-staff, after the US and China. From 2.2 million people engaged as flexi-staff in India, the industry is expected to grow to 2.9 million by 2018, following US (14.4 million) and China (8.1 million), according to the Indian Staffing Federation (ISF). 

At a time when hiring has been constrained across sectors coupled with lay-offs, the flexi-staffing industry is buzzing with an annual growth rate of 12-15%, with some of the leading players, such as TeamLease and Innovsource, pegging an over 20% growth.  

In flexi-staffing, a short-term contractual worker enters an employment contract with a flexi-staffing company (FSC) that sends them to work under direct supervision of a user company, based on a separate contract between it and the FSC. Currently, 2.2 million people are engaged as flexi-staff in India. According to ISF, of the total workforce of 406.4 million, roughly 50.8 million are engaged in formal employment, of which 28.4 million are involved in temporary employment.

“Retrenchment and rationalisation is happening mostly in those companies that are not built on a sustainable model. There are others in the same sectors that are growing in a healthy manner. However, every sector which is growing and adding manpower is increasingly using flexible workforce, since flexi-staffing is clearly a competitive edge for many organisations. We (TeamLease) have grown by over 25%, while the industry has grown 18% in the last six-seven years. We are estimating a similar pattern in the months to come,” said Rituparna Chakraborty, executive vice-president & co-founder, TeamLease Services, and president of ISF. 

FSCs anticipate generation of gainful employment opportunity for the 5.7-million educated unemployed in India, with more corporates turning towards this recruitment option. 

In recent times, economic factors, such as demonetisation and the goods and services tax, have also been contributing to the burst in flexi-staff requirement across sectors. After demonetisation, micro, small and medium enterprises, which earlier hired informal workforce on cash, have now been resorting to flexi-staffing to regularise their human resources.

ISF estimates that with every one% conversion of informal workers to flexi, 1.5 million gain access to social security by engaging in formal workforce. 

FSCs cater to over 15 sectors that employ 92% of India’s workforce, leading with 1.81 million flexi-staff of the total 2.2 million. Among these, banking, financial services and insurance (BFSI), infrastructure and logistics are the top three sectors employing 0.69 million flexi-staff, according to ISF.

“While currently flexi-staffing is mostly prevalent at lower levels, more companies are becoming aware of organised FSCs operating in flexi-staffing, especially in BFSI, retail, e-commerce and IT (information technology). We are anticipating an over 20% growth in our flexi staffing business,” said Raja Sekhar Reddy, director and chief operating officer of the Rs 1,200-crore staffing and security firm Innovsource. 

One of the challenges the industry is facing is in terms of people’s reluctance to engage in flexi-staffing. 

“However, they don’t understand that for each duration they prefer to sit out unless they get permanently employed, they are losing an opportunity to get skilled,” Chakraborty stated. 

Compensation packages in flexi-staffing range between Rs 18,000 and Rs 30,000 per month, with contracts being signed for a duration of anywhere between three months and three years. However, ISF member companies are not allowed to charge from candidates. 

Seeking flexibility

• India to employ 2.9 mn flexi-staff by 2018
• Flexi-staffing growth rate to accelerate to 15-18% per annum
• With every 1% conversion of informal workers, 1.5 mn gain access to social security