Feature

Contract workers—the pros and cons

With companies being watchful and cautious about manpower recruitment, contract workers are being hired on a larger scale than before. Renuka Vembu analyzes the trend that is here to stay

The clouds haven’t yet risen from the IT industry. While other industry verticals are showing signs of improvement, the IT/ITeS sector is still finding its wings clipped by the slowdown impact. Among some of the measures companies had undertaken to reduce their operating expenses and curb finances, was reduction in manpower—while in some organizations it was done in the form of large-scale retrenchment, others took a more methodological approach of reducing the bench. Cross-functional training, cutting the excess fat in the human capital of a company, consolidation of resources, weeding out performances, scaling the level of quality and output expected, etc., were some of the means by which organizations managed to scrape through the financial crisis and the economic burden.

While there was almost a freeze on the recruitment cycle, with pink slips being dispatched at an alarming rate, one of the concepts that companies are now seen using increasingly, post the doom phase, has being employing temporary/contractual staff on board. Contract workers are now largely perceived to show the way out—from the worsening crisis then and the fluctuating labor requirements now.

Assessing the current scenario

SJ Raj, Senior Vice-President, HR, Newgen Software, gave an overall market perspective on the IT industry, “The IT industry is still sluggish and largely dependent on the recovery of the international markets. In these market conditions, the current job scenario has still not opened up completely for IT. As far as hiring is concerned, employers would continue to maintain a conservative outlook. While organizations catering to the domestic sectors are continuing with their hiring plans, companies that are dependent on US and Europe for their business are going slow on hiring. In the IT industry, as the markets continue to open and IT spending improves, recruitment will take some time to pick up pace. Selective hiring (replacements for niche skills and essential business requirement) will still continue among organizations, but generic hiring or hiring for growth will be negligible.”

Though the times have bettered, it is still vague what the near future holds in store for the industry. Many companies have been crippled and to stand firm on their feet again will take sufficient amount of time. Once bitten, twice shy—they will now act prudently and over-cautiously till the scars heal. For a long time, the financial ghosts will be there to haunt the balance sheet.

Senthilkumar Deivasigamany, Vice President and Senior Partner—Operations of Barry Wehmiller International Resources, viewed, “Though there is optimism and all companies seem to be seeing more activity and traction with the customers, it may be a while before they turn into real orders or projects. At the moment, the cost and margin pressures continue to remain and hence companies will prefer to wait and watch before going out to recruit people at a fast pace.”

The ‘temporary’ bug

Reducing the bench essentially called for restraining the mass recruitments that were earlier a norm and utilizing the candidates who were taken in, for projects that were still to kick off. With the going getting tough, companies are now being cautious and catering to only timely needs and demands. Project-based hiring has gained momentum in the IT sector and now temporary contract workers seem to be the answer to the fluctuating client market environment and thereby the human resource needs.

Though this kind of recruitment was prevalent earlier too, it has now become more conspicuous and viable too. To tide over the additional human capital that lays idle, organizations are going in for more of project-based staffing needs, as per the requirements of the clients. This helps them to cut down on their budget, and other associated expenses.

Nipa Modi, Chief Executive Officer, CRP HR Services and Chief Marketing Officer (CMO) for CRP group, felt, “Temporary and contract staffing is normally not very big in IT companies, especially because of concerns regarding data security. Some companies have looked at outsourcing certain project-specific resources, but not in a big way, or without client consent. However, there will continue to be a lot of stress on campus or fresher hiring, as in earlier years, to manage the cost of recruitment.”

But Mukesh Sharma, Founder and CEO, QA InfoTech, had a different take that temporary/contract staffing is not a new management trend and it is here to stay. Amidst layoffs and cautious hiring, temporary and contract staffing is fast emerging as a much cost-effective option. Even the central government is in favour of contract employment. Recently a group of ministers (GoM) on contract labor agreed, in principle, to open up 13 areas, including IT services, for contract employment.

Aruna Thalapuram, HR Manager, Rising Solutions, felt that recruitment for entrants would continue as educational institutions would be able to cater to a low-cost option as opposed to experienced hires. SMEs in the IT industry would continue hiring as this is an opportune moment for them.

Dharmesh Mistry, Vice President and Chief Talent Officer, Ugam Solutions opined, “Generally large firms have traditionally relied on contract/temporary workforce and it has always been the case in the much mature economies. However, the demand-supply gaps on the talent availability could have forced companies to keep a larger bench than take temporary/contract employees. The overall short-term impact, post the current economic situation, would be a win-win situation for both—the technical-skilled workers as well as the companies, and this could continue till the demand-supply situation once again tips towards creating a shortage of talent.”

Factors driving the new wave

A slew of factors contributing to this increased phenomenon are—nature of business, kind of operations, client requirements, criticality of projects, company’s current standing and future goals, business vision, etc., which play an important role while companies assess their need and feasibility for opting for temporary staffs.

Bikram Dasgupta, Chairman and CEO, Globsyn Group, opined, “Some amount of contract hiring has always existed and it did increase during this period. But again, it depends on the domain. If the company feels the need for a specific domain hire for its growth needs, it will not take temporary people, even if the project is short-term. It is important to retain the knowledge and specialization for the customer to give repeat business.”

Jagat M Sarkar, Head, HR, eRevMax Technologies, listed the various factors which attracted companies to recruit people on a temporary basis:

• Shorter recruitment process: Most contract workers are hired through specialized agencies, which have people with the required skill set. Another benefit is that these workers are on the payroll of the agency and not of the company where they work, thereby reducing the HR workload.
• No training cost: Based on the project requirement, the agency sends across people with the necessary experience and skill sets, thereby negating the need for training.
• Reduced overall cost: When hiring temporary staff, companies have to pay the workers only when the project goes live and as soon as the project gets over, the contract also gets over. So there is no staff on bench and plus there are no costs for perks and benefits, which the company has to provide to permanent employees, which adds to huge cost savings.
• Better performance: Often professionals who take up project-based work tend to give their best as they know that the project has a timeline and they need to stick to it. They are self-motivated and hence productivity is higher.

Two sides of the coin

The effects of going in for temporary workers, is a double-edged sword, which has to be played with carefully. While some may give in their best performance and dedication with a view to make a mark and sneak their way into the company, others may be putting up an unsatisfactory and average performance, a causal attitude, because they do not foresee a permanent working association with the organization. While some temporary workers are self-motivated, others need a push to better their morale. Cultural adjustment and molding too would be a major hurdle, unless handled prudently. Erratic changes, both for the company and the employee, have to be managed deftly.

Though companies avoid their fixed costs and training expenses by roping in temporary employees, getting these staff may be a tad difficult since the Indian culture and mindset is more skewed towards job security and not these sporadic moves. Fewer would actually be open to risking and experimenting with newer companies and brands, and explore their work space.

Also, an organization cannot go in for short-term employment opportunities for projects that are of critical importance. Relationship building with client, entrusting employees with confidential data or even bonding between team members becomes a tough task.

Temporary staffing is thus opted for, when the requirements falls outside the purview of the company’s core competency or area of specialization. Guarding against the loss of the knowledge quotient is one of the most critical aspects that companies would brood over.

Augustine V D, Vice President, HR, Robert Bosch Engineering and Business Solutions India (RBEI), added that depending on the nature of projects in hand and as foreseen, the mix will be decided. Companies cannot remain competitive with no permanent staff. Also, for very short-term needs, it is not strategic to have permanent staff when the visibility of future need within the company is not certain.

Yashraj Vakil, COO, Dream11 Gaming, explained, “Employing temporary workers is a double edged sword for the overall job scene in the country. If the markets take time to recover, it will create greater unemployment as those with temporary contracts will be terminated at the end of a particular project. However, on a positive note, the strategy of recruiting temporary employees at this point is a win-win situation for companies and workers, wherein those without jobs can get a means of livelihood and companies trying to meet deadlines can get easy access to additional manpower. If markets recover earlier, there is a good chance that well-performing temporary workers might get permanent placements.”

Trends to be spotted

Social and professional networking sites seem to be the next big trend that job hunters use to search for prospective employees. Sanjay Koppikar, CEO, Quadwave Consul-ting, gave a peek into some other models/strategies of hiring trends that will catch up soon:

• Placement consultant innovations: Larger manpower companies have to be innovative—they cannot be charging like 15% anymore. This will lead to shared-risk models or more value-add for placements, rather than traditional models. For smaller HR consultants, it may become much lesser margin market than what it used to be.
• Social networks would play increasingly important roles in hiring rather than being just job portal ‘Supermarkets’.
• Like Odesk and Elance, we could see some more indigenous contract platforms. May be, this is an opportunity for Naukris of the world to become such platforms. This will make a huge difference on the job market.
• For senior management positions, the big fat pay-packages would be purely against the performance linked rather than ‘sign-on’ bonuses of the past

In the hiring phase, generalized skills will no longer be able to sustain on their own. Specialization is the way forward, and domain expertise will be the value addition that companies will look at.

renuka.vembu@expressindia.com