Business

Emergence Of Domestic Flexi Staffing Sector May Help Indian Garment Exporters Immensely

The garment sector is known for its labour-intensive nature. Garment manufacturing units in India, particularly catering to exports markets, have to follow cyclical behaviour of the business wherein companies increase or reduce production as per the seasonal needs of their global customers. However, these units often have little flexibility on the workforce front. In other words, they have to continue with the same volume of workforce during slack season and this takes toll on their overall competitiveness. In the recently-announced package for the garment industry, the government has tried to address this issue to a certain extent.

Towards this end, the fast-emerging domestic flexi or temporary staffing sector can play a major role. The concept where organisations don't hire employees on their roll, but source their manpower requirement for certain functions from entities called staffing companies, is fast catching up in case of India Inc as well. Though the concept in its unorganised form has been in existence for several years, the organised structure where the workforce being on the rolls of flexi staffing companies (FSCs), enjoys most of the statutory benefits employment (such as EPF, ESI, medical insurance), is gaining grounds in India. From being confined only to few sectors, the phenomenon of flexi or contract staffing is spreading its wings across various sectors. With over 10.5% penetration, the ITeS sector leads the table, followed by IT (8.65%), e-commerce (8.01%) and BFSI (5.65%). Pharmaceuticals, manufacturing/machinery and education, training & consultancy are the other sectors that enjoy higher levels of penetration of flexi staffing in India.

The Indian garment manufacturing units catering to domestic market though often use contact labour force, it comes from the unorganised sector. However, now with emergence of flexi or contract staffing sector in the organised sector, garment manufacturers can use their services in a big way. "Currently, the flexi staffing sector has a very limited (negligible; even as it caters of other sectors of manufacturing) to the garment sector (primarily due to its unorganised nature) in India, the services of this sector are quite popular in other parts of the world. Going forward, as the garment industry gets more maturity and the staffing industry enlarges its size, we would see the concept catching up in the domestic garment sector as well.

This will go a big way in helping the industry which often faced with labour-related issues," says Rahul Mehat, president, CMAI. According to a recent study by the Indian Staffing Federation (ISF), the apex industry body that came into being in 2011 with the objective to create a much suitable environment for the growth of an organised flexi or temporary staffing sector in the country, the penetration level in India will go up to as high as 2.9% by 2018. With this, India will move one notch up to the 3rd largest largest employer of flexi staff from being 4rth largest at present in the world.

The US, China and Japan are three largest staffing countries in the world. The domestic staffing sector(organised or formal ) that currently employs around 2.1 million people, is expected to employ around 2.9 million people by 2018. In fact, the sector is likely to swell to 9 million workers in the next 7-8 years.

With growing economic indicators and increasing adoption of flexi staffing in the formal sector, the industry will continue to gain momentum. In the last four years, the sector has grown at a CAGR of 10.3%.

In the next three-four years, flexi staffing industry is likely to grow at a higher CAGR of 12.3%, even as concerted efforts are now being put in place by the various stakeholders to bridge the gaps and eliminates the impediments coming in the way.

This includes the reform process being initiated by the government in case of labour laws. The ISF study has also interestingly highlights that 87% of India's contract workforce are working in informal (unorganized) sector without proper work benefits. With every one per cent conversion of informal workers to flexi staffing, 1.5 million people gain access to social security. Currently, there are around 158 million people who are working as casual and salaried workers in the informal sector without availing basic employment benefits. According to experts, most of the traction is coming from conversion of unorganised sector into organised flexi staffing space and the going forward this will further get impetus as the policy makers attempt to put in place the much desired regulatory frame work for the industry. And this will expedite the conversion process, leading to a much bigger pie for the formal sector.

"Staffing, an established form of outsourcing globally, is yet to be fully recognised and adopted as an effective means of running a business in India. The traction that we as a sector have generated so far is without much of support or system in place. In other words, all this is despite the fact that the industry lacks official recognition, and the rigid laws are ill-suited to its unique industrial structure. In the last few years, under the aegis of ISF, the industry has been able to draw the attentions of policy makers and hopefully things will be much better for the industry in future," says Rituparna Chakraborty, president, ISF, who is strongly of the view that by 2025, around 10% of the overall workforce in India is likely to be working in a flexible capacity through staffing companies.