IT, ITeS and retail companies hiring more temporary employees

Companies across the information technology (IT), IT-enabled services and retail sectors are hiring more temporary staffers, shining a glimmer of light in a bleak economic scenario. At the same time, they are moving with caution, cutting the number of permanent employees on their rolls and running multiple checks before they hire.

"We are adding 7,000 temporary employees a month, but are down by 35 per cent permanent staffers in the past few months compared with the same period last year," says Sangeeta Lala, senior VP and co-founder, TeamLease Services. In the previous slowdown in 2008-2009, companies fired 20,000 temporary staffers in a 15-month period, before asking permanent employees to go.

Companies can take in temporary hires with every spurt in business, but if things become difficult, they will not renew contracts, adds Lala.

While cutting jobs is standard practice during a downturn, staffing firms have started to feel the heat this year. Team-Lease Services, Randstad India, Kelly Services, Adecco India and Manpower India notice that business heads are playing extra safe while adding to the permanent head count.

The temporary staffing business in India is pegged at around Rs. 3,000 crore while the permanent staffing business is at nearly Rs. 17,200 crore. The global temporary staffing industry is at around $140 billion. "Temporary growth takes place where there is a need for maintenance and sustainability, but when there is growth in industries and greenfield projects, the demand is for permanent employees," says a senior Randstad India executive who does not wish to be named.

The firm has seen temporary hiring go up by 20 per cent compared with the same period last year, while permanent hiring has slowed down by 25 per cent in the past six months. "While last time, all hiring had stopped, this time recruiting is taking a while. There is a squeeze in the middle and junior-levels and clients are not looking at volumes," says the executive.

Even for temporary hires, companies are opting for multiple rounds of interviews, psychometric and other assessments tests. Manpower Services has seen temporary staffing grow by 15 per cent in the March-May period compared with the same time last year, while fixed hiring has dropped. But since around 85 per cent of its business is from workforce on lease, the staffing firm is not too perturbed, says a senior executive of the firm who does not wish to be named.

On the other hand, Kelly Services has seen a 15 per cent dip in permanent hires, mainly in the IT industry. The staffing firm has also seen some permanent positions in the sector going to the temporary workforce, says Kamal Karanth, MD.

In 2008-2009, all costs were curtailed and therefore the temporary workforce was flagged down as well. "Organisations are conservative as permanent hiring is at least two to five times more expensive than a temporary one," says NS Rajan, partner & global leader - people & organisation, Ernst & Young.

The dip in permanent hires will impact staffing firms, but only just. Despite being a high-margin business, only 10-15 per cent of staffing firms revenues come from permanent positions. In comparison, the temporary staffing business a large volume, cut-throat-margin game.

But not all staffing firms are willing to see current trends as a no-win situation for permanent hiring. The changes are after all, cyclical, economy-related, impacted by the outsourcing of services and dependent on hires the firms have made last year, when the going was good.

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