Salary cuts likely to follow.
The US financial meltdown has finally managed to do what the business process outsourcing (BPO) sector has been trying to do for years on end — reduce the attrition rate of employees by 5-15 percentage points. BPOs that were coping with 30-40 per cent employee turnover are now reporting numbers between 20 per cent and 30 per cent.
Industry insiders as well as sector experts said that companies are unlikely to miss this opportunity to rationalise bloated boom-time salaries. “Companies are aiming to go back to the cost levels of 2005 and 2006. So, we will see an across the board reduction in salaries,” said KPMG Head (people and change advisory) Ganesh Shermon.
Genpact, the largest BPO in the country, reported attrition rate of 26 per cent for the nine months ended September 30, 2008, down from 30 per cent in the same quarter of 2007. 24x7 Customer said the drop in attrition has been 10 percentage points this month. The company’s annualised attrition rate is 38 per cent.
| ACHIEVING THE IMPOSSIBLE | |
| Company | Attrition rate drop (in % pts) |
| Genpact | 4 |
| 24x7 Customer | 10 |
| Satyam BPO | 15 |
| Cbay Systems | 10 |
| Syntel | 4-5 |
For Satyam BPO, the month-on-month attrition has come down by approximately 15 percentage points. Healthcare BPO Cbay Systems has seen a drop of 10 percentage points in the last few months. And Nasdaq-listed Syntel has seen a 4-5 percentage point drop.
BPOs, on their part, said this had less to do with the economic meltdown and more with the human resources development practices they have put in place. But analysts said that this has happened because of the global economic uncertainty — employees are choosing to stay put on their jobs than risk new ones.
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Companies said they had not seen any contraction in the demand for their services and they will keep on hiring people in large numbers. Cbay Systems, for instance, plans to increase its headcount by 10,000 in the next 18 months. “Satyam BPO has not witnessed any diminishing of demand from our existing customers,” added Satyam BPO Global Head (human resources) Naresh Jhangiani.
What is certain is that salaries in the sector will soon get rationalised. “We believe there is an opportunity for salary rationalisation. We are looking at not only the entry level but the middle and senior levels as well. We might see a drop of 5 per cent in salary levels in the coming few months,” said Syntel Global Head (human resources) Srikanth Karra.
“Going ahead, salary increases will be on the basis of productivity. While the fixed salary should remain the same, the variable pay will see changes,” Cbay Systems Chairman and CEO Raman Kumar said. “At the middle- and top-management level, things had gone a bit haywire and this period will bring the required balance.”