With a workforce of 463 million people, India is one of the world’s largest labour markets.
Q: What are the main challenges and opportunities currently facing the Indian labour market?
A: The ongoing Covid-19 pandemic has disrupted employment across multiple sectors and categories in India’s labour market. While positive news is now emerging in some areas of the economy – with the latest data showing recovery returning across several indicators including GST tax receipts (VAT levied on goods and services), fuel consumption and transport – many sectors such as retail, tourism, consumer services, daily wagers and SME’s are still feeling the impact.
One sector that has seen significant growth and deepening influence both at home and internationally in recent years is India’s IT industry. Employment in the IT, e-commerce, logistics and telecoms sectors has continued to thrive and grow over the past year. The country’s strength in these sectors is well established and has been accompanied by a marked improvement in employment prospects.
The Indian government introduced a new policy framework in May/June 2020 in response to the challenges of the Covid crisis. This Atmanirbhar Bharat policy – which means Self-Reliant India in Hindi – has served to strengthen our domestic market and create stability in the hiring of workers in the SME sector. Core sectors such as the infrastructure and construction industries are also expected to offer strong employment opportunities in the coming years.
Most notably, the government has taken action to address the fact that some 85% of Indians work informally, with no labour contract. It has set the goal of formalising work for nearly 390 million workers over the next decade or so. Some 120 million of these people are currently employed in SME’s while 130 million work as daily wagers or in construction related roles. A further 20 million people are employed as gig workers, while 50 million Indians are domestic workers and further 50 million work in goods and transportation.
Our government has also recently subsumed 44 Central Labour Acts into four new Labour Codes – a Code on Wages, Code on Social Security, Code on Industrial Relations and a Code on Occupational Safety Health and Working Conditions – that simplify the rules and regulations governing the labour market. Many of the old Codes had been in place for almost sixty years and were completely out of step with today’s realities and business models. The new Codes mark a significant step forward and the Indian government has also announced its intention to offer social security coverage to gig economy and platform workers. This will be financed through a levy on the turnover of the Platform company, at a rate of 1-2%, up to a maximum of 5% of the wages paid to each gig worker. The income it will generate should be sufficient to provide these workers with pensions, social security, medical insurance and death and disability benefits.
Q: How do you see the industry’s role evolving in both the short and longer-term? What is the outlook for flexible staffing?
A: Before the pandemic hit, the Indian Staffing industry was growing at a very healthy compound annual growth rate (CAGR) of 11%, with the large, formal players experiencing growth at an even faster rate of around 16% CAGR. The industry is set to benefit from the positive population and demographic trends in the Indian labour market up until 2054.
As already outlined, India’s labour market is dominated by informal work, with less than 15% of workers employed under a formal employment contract. This is equally the case for our formalised staffing industry, which also suffers from a very low penetration rate at just 0.7% of the employment market. However, we are confident that as economic sectors including construction, transportation, logistics and manufacturing are set to witness strong growth over the coming years so it is expected that millions of workers will transition out of informal work and into formal employment. This presents staffing companies with a strong opportunity and they are set to reap significant benefits from this growing trend.
Q: How prepared is your market for the post-Covid world of work?
A: Post Covid India is in pretty good shape thanks to its robust IT, telecoms and banking sectors. As our economy begins to recover so the strength of these sectors, combined with the benefits brought about by the newly-to-be-introduced Labour Codes, will serve to fuel investment and a climate of industrialisation. This too will further benefit from the formalising of employment. Indian companies are looking to foster further collaboration with partners around the world and I believe that we will see a variety of different employment models co-existing alongside one another – including agency work and gig work which are India’s newest and fastest-growing work segments.
Q: What action are you taking to support your members, their client companies and workers in leading in the new normal?
A: In recent years we at the Indian Staffing Federation (ISF) have ramped-up the number of member events and webinars that we hold. We have run sessions on a host of topics that are useful to our members – from cash flow management and contract/compliance management to a series of sessions on the recent changes in the Labour Code and what they will mean. We have also worked to support members financially – including by allowing the payment of membership fees to be made in three instalments.
Over the past five or six years, beyond our work with members, ISF has been working very closely with the government to strengthen and advance labour regulation. The announcement of the new Labour Codes is proof that we have made some real progress. In fact, one of the new, far-reaching laws relates specifically to our own sector. It introduces the opportunity for formalised staffing companies to apply for a National Staffing Licence that will be valid right across the country for a period of five years as opposed to the current system which requires a labour licence for each work order or company tender.
