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India HR and Recruiting Issues Update - : Labor Market Overview
India HR and Recruiting Issues Update - : Labor Market Overview
India HR and Recruiting Issues Update - : Labor Market Overview
With an expanding economy and consumer base, along with burgeoning capabilities
in service sectors like information technology and business process outsourcing,
India is the new go-to place for Western companies large and small. Despite India’s
huge population, however, the current expansion is tightening the supply of skilled
labor. Furthermore, many differences in laws, compensation, and business culture
can make HR in India a challenge. This article provides a brief overview of laws,
practices, and other local conditions vital for HR and recruiting in India.
Looking in the aggregate, India has a huge number of employable workers. Out of
India’s population of 1.1 billion people, about 160 million are in the non-agricultural
workforce. The population is matched by a large educational network of over 10,000
colleges of various sorts. India has over 22 million college graduates, 7.2 million of
those in science and engineering. It turns out 2.5 million new graduates each year.
Since 2002, seasoned technical and managerial staff have been in particularly high
demand in India, with salaries rising sharply every year. Competition is fierce, with
frequent job-hopping and poaching the norm. Still, salaries are significantly less
than those in the US.
Legal environment
Although deregulation in the 90’s made it much easier to do business in India, the
legal system is still onerous by American standards. Among the hazards one must
deal with are: the huge number of laws on the books (estimated at over 2000, but
never codified); joint federal and state government authority over labor; and and
ambiguous laws. However, restrictions are often lighter for the newer service
industries, and the regulatory burden is no longer so heavy that it deters
investment.
Working Conditions
Working conditions standards in India depend on state and federal laws, as well as
whether the workplace is a “specified establishment.” Factories, mines and
plantations are usually put in this category. When in effect, regulations set standards
such as: annual paid leave of 19 days; a working day not less than 12 hours; and
double pay for overtime above 9 hours a day or 48 hours a week. Also,
governmental permission is needed for female employees to work at night, though
this is usually granted in service sectors.
Compensation Structures
For Westerners, one of the most unfamiliar aspects of employment in India is the
prevalence of non-salary benefits. The structure of compensation usually comes out
to about 40% base salary, 35% flexible benefit plan, and 25% retirement benefits and
performance-based pay.
This system came about mainly because most non-salary benefits were tax-exempt
to the company. However, these tax advantages are being chipped away at,
especially with the Fringe Benefit Tax (FBT), a new corporate tax established in 2005.
The FBT lists tax valuations for many different benefits, such as entertainment,
travel, and gifts, ranging from 0% to 30% of the benefit’s actual value. As a result of
the FBT and other changes, benefits are being reduced somewhat, but they are still a
significant part of the Indian HR landscape.
The Flexible Benefit Plan (FBP) is a standard corporate practice where an employee
is assigned a fixed monetary amount to receive in benefit form. He or she then
chooses how to take them, depending on personal and tax circumstances. Common
benefits include rent, house payments, transportation, medical insurance, children’s
education, and subsidized loans.
Compensation Levels
Salaries in India vary sharply by education quality and experience. As shown in the
charts below, an entry-level IT hire may earn as little as US$2,000 annually, while an
engineer freshly graduated from a reputed university will easily make US$12,000. In
some of the highest-demand sectors, salaries for particularly experienced staff have
even risen to surpass American levels – IT managers with 15 years’ experience, for
example, command about US$220,000. However, this is an exceptional sector; pay
for functional heads is generally about a quarter of American levels. Overall, salaries
are rising by 10-30% yearly.
The most prominent social security program in India is the Provident Fund.
Although it is only mandatory for employees making under about US$141 monthly,
it is used almost universally because of its tax benefits. It takes contributions of 12%
of salary from the employee and 12% from the employer. Its funds go to a
retirement pension as well as to lump sum payments for death or disability.
Expatriates are less common in India than in most Asian countries, except for top
positions. Pharmaceutical, hospitality, and airline industries are among those most
often hiring expatriates. Returnees are becoming more common, but are still limited
overall; however, they rarely command higher salaries than locals. India does not
have a system that would allow a foreigner to move easily from job to job on the
same permit; work visas are tied to jobs.
Recruiting Methods
Like the US, India has a wide range of recruiting methods. Much recruiting is still
fairly informal, with walk-in interviews common below the managerial level. In
specialties like finance, engineering, or marketing, on-campus recruitment is often
used to find entry-level candidates. Advertisements and recruitment agencies can be
effective and even necessary to recruit for managerial positions. Internet job sites
like Monsterindia.com and Naukri.com are also coming into wider use.
Employee Characteristics
In deciding whether to take a job, they will consider such factors as responsibility,
career prospects, company reputation and profitability, their offered title, travel
opportunities, and the possibility of going overseas. Multinational companies tend
to have more prestige, even as the gap between their salaries and domestic company
salaries is narrowing.
Retention
There was a time when many Indians hoped to stay in one job for life, but that is no
longer the case. Employees will now frequently check up on average industry
salaries, and will readily switch jobs for an inducement. Indians may take an
overseas posting as an opportunity to relocate to the West permanently.
Conclusion
India is full of capable, effective workers that can excel. The catch is that most of
them are already employed. To get the most out of your Indian operations, a careful
and proactive HR strategy, adapting to local culture and practices, is imperative.
HCI Research
Recruitment Process
Today’s Challenges
and Opportunities
H u m a n C a p i t a l I n s t i t u t e | F u t u r e s t e p |
A research report prepared by
A Research Study Conducted by the Human Capital Institute for FuturestepFuturestep
Futurestep, a Korn/Ferry Company, is the industry leader in strategic
talent acquisition, offering fully customized, flexible solutions to help
organizations meet specific workforce needs. Strategic RPO from
Futurestep combines talent acquisition strategy, global recruiting
resources, competency-based methodologies and a flexible service
delivery model that enable clients to identify, attract and retain top talent.
In addition to Strategic RPO, the company provides a full-spectrum
portfolio of services, including: Project-Based Recruitment, Mid-Level
Recruitment, Interim Professionals and Consulting Services.
With locations on four continents and a record of success in securing
top talent around the world, Futurestep provides the experience and
global reach to help companies turn talent acquisition into a competitive
advantage. In 2008, Futurestep was named as part of the annual Baker’s
Dozen list of top RPO providers by HRO Today Magazine. To learn more
about Futurestep and its complete array of Strategic Talent Acquisition
solutions, visit futurestep.com.
Today’s Challenges and Opportunities
By Dr. Ross Jones, Senior Researcher/Analyst, Human Capital Institute
Executive Summary
Organizations outsource recruitment and hiring practices for many reasons. Some may
lack the internal
resources to address their talent acquisition needs. Others may want to focus on core
competencies, or
to look for a competitive advantage in competing for talent. Whatever the reasons,
Recruitment Process
Outsourcing (RPO) is a growing practice. Despite this growth, limited information
exists on the trends in
RPO use, the specific recruitment practices it includes, and how well it is being carried
out.
Survey
1. Given the current economic downturn, what trend do you predict for the
outsourcing of recruiting practices in your organization over the next two years?
2. Assuming that your overall recruiting budget will decrease over the next one
to two years, what will be the trend for your spending on Recruitment Process
Outsourcing (RPO)?
3. Would your organization outsource strategic recruiting practices (e.g., talent
strategy development, employer branding, recruitment planning) IF it resulted in an
increased Return on Investment (ROI) for your talent acquisition process?
The responses to the first question point to the uncertainty gripping businesses
today — both because of the range of responses and by the fact that the largest
group of respondents is the uncertain one.
However, many organizations are open to the possibility that RPO, particularly if
focused on strategic business needs, can be a tool to compete during difficult
economic times. The first indication of this comes out of the answers to the second
question above — namely that 44 percent of respondents are open to the possibility
that, even if their overall recruitment budget declines, their organization’s investment
in RPO may increase. Specifically, while only four percent believe that their RPO
budget will increase, 40 percent are unsure about the future of their organization.
Again, while highlighting the current uncertainty about what can and will be done
in the future, this result points out that many organizations remain open to the
possibility of increasing their RPO budget in the future.4
Recruitment Process Outsourcing: Today’s Challenges and Opportunities
Copyright © 2009 Human Capital Institute. All rights reserved.
Finally, as the figure below shows, the answers to the third question indicate that
strategic RPO may be the answer for many organizations looking to optimize their
investment in talent acquisition. In fact, 78 percent of our respondents are either
using a strategically focused RPO effort now, would definitely use it in the future, or,
at least, have not ruled it out. The fact that 52 percent of respondents are unsure
if their organizations would move to a strategic RPO, even if it might increase their
ROI, again points to the uncertainty of today’s economic environment. However, it
also highlights a silver lining — that a vast majority of businesses will remain open to
the idea of increasing investment in RPO in general, and strategic RPO in particular,
if it helps them compete in the complex environmental climate of the future.
0 10 20 30 40 50 60
No
Already use
strategic RPO
Yes
Unsure
Would you outsource strategic recruiting practices if it
increased your talent acquisition ROI?5
Recruitment Process Outsourcing: Today’s Challenges and Opportunities
Copyright © 2009 Human Capital Institute. All rights reserved.
I. Talent Acquisition and RPO — The Current State
Facing increasing competition for talent and the current economic
downturn, many organizations are focusing limited resources on core
business needs. As a result, they are outsourcing many key recruiting
processes (see Figure 1), fueling the growing trend for services and
solutions in the market known as Recruitment Process Outsourcing (RPO).
During August and September 2008, we surveyed and interviewed a wide
range of HR professionals, from many types of organizations, to determine:
The current state and successes of RPO
The challenges and opportunities facing RPO
The best practices and solutions for implementing a winning
RPO program
Defining RPO
What talent acquisition activities are organizations referring to when they
say they use RPO? Our study found a general consensus that RPO is the
selective outsourcing of some recruiting activities. Results reveal that 73
percent of responding organizations believe that RPO is the outsourcing
of some or most recruiting processes, while only 16 percent define RPO
as the outsourcing of all recruiting activities for, at least, some levels of
employees
Recruitment Process Outsourcing: Today’s Challenges and Opportunities
Copyright © 2009 Human Capital Institute. All rights reserved.
What are some other definitions of RPO?
(From the 10 percent that chose “Other”)
“Outsourcing ANY aspect of the recruiting process for ANY level of employees”
“RPO can be an end-to-end solution for all positions, or a service to take over part
of the recruitment process, or be confined to just a certain title-type, such as a
highvolume title. RPO can be as flexible as it needs to be for what the client wants.”
“Outsource according to current needs of firm — could be any one of the above
at different times or economic conditions. Ability to recruit for needed hires varies,
depending on the current workload for in-house recruiters.”
“RPO can mean any or all of the above options based on business need.
Some organizations choose to keep recruiting higher-level positions within
the organization, while outsourcing the candidate sourcing, screening and
administrative support ... up to and some including onboarding (full life cycle).”
Challenges of Organization
One of the toughest tasks for organizations is to hire perfect people suitable for their requirement.
Economy is booming like everything, every organization is trying to maintain pace with growth rate of
economy. They are grabbing new assignments, looking for new business segment to maximize their
benefits. Such efforts need fresh human resources, maximum utilization of existing resources and to
maintain consistency among them.
Recruitment has been a mammoth task for organization always. The current trend is of outsourcing
recruitment and other HR Practices. Today Human Resource Consultants and Recruitment Agencies play
important role in performance of organization.
Performance is a vital factor. It’s a function of all the Human Resource Components:
1.Selecting individuals who are best able to perform the jobs defined by the organization.
4.Developing employees to improve their current performance at work as well as to prepare them to
perform in positions they may hold in future.
What we provide?
Here at Talent Onions, we enable you to improve people performance by more effectively planning and
acquiring your talent pool, as well as processing and assessing from an applicant pool that can be rapidly
converted into your productive work force. Our Enterprise Solutions portfolio integrates technology and
professional services that help you achieve a balanced scorecard on the critical dimension of
recruitment.
Our Approach
We begin by defining the scope of the assignment in discussion with our client. This may require a
diagnostic study or a brainstorming session with a client team.
Defining the approach or methodology that we will adopt is the next step. Our focus will be to use
relevant tools and techniques from a vast array and customize our approach to client needs. We do not
believe in the "one coat fits all" approach.
Most assignments require a good understanding through evaluation of facts and situations. We believe
data integrity and relevance is as important as the sophistication of analysis. This requires considerable
checks and cross checks.
Providing the right perspective and insights is what adds value to analysis. Our wide knowledge and
experience across a range of industries enables us provide this and has earned us the respect of our
clients.
We finally present our findings and thoughts with clarity and absolute independence to various levels of
management.
Human Resource Management theories focus on methods of recruitment and selection and highlight
the advantages of interviews, general assessment and psychometric testing as employee selection
processes. The recruitment process could be internal or external or could also be online and involves the
stages of recruitment policies, advertising, job description, job application process, interviews,
assessment, decision making, legislation selection and training (Korsten 2003, Jones et al, 2006).
Examples of recruitment policies within healthcare sector and business or industrial sectors could
provide insights on how recruitment policies are set and managerial objectives are defined. Successful
recruitment methods include a thorough analysis of the job and the labor market conditions and
interviews as well as psychometric tests to determine the potentialities of applicants. Small and medium
sized enterprises (SMEs) also focus on interviews and assessment with emphasis on job analysis,
emotional intelligence in new or inexperienced applicants and corporate social responsibility (CSR).
Other techniques of selection that have been described include various types of interviews, in tray
exercise, role play, group activity, etc.
Recruitment is almost central to any management process and failure in recruitment can create
difficulties for any company including an adverse effect on its profitability and inappropriate levels of
staffing or skills. Inadequate recruitment can lead to labor shortages, or problems in management
decision making and the recruitment process could itself be improved by following management
theories. The recruitment process could be improved in sophistication with Rodgers seven point plan,
Munro-Frasers five-fold grading system, psychological tests, personal interviews, etc. Recommendations
for specific and differentiated selection systems for different professions and specializations have been
given. A new national selection system for psychiatrists, anesthetists and dental surgeons has been
proposed within the UK health sector.
Recruitment is however not just a simple selection process and requires management decision making
and extensive planning to employ the most suitable manpower. Competition among business
organisations for recruiting the best potential has increased focus on innovation, and management
decision making and the selectors aim to recruit only the best candidates who would suit the corporate
culture, ethics and climate specific to the organisation (Terpstra, 1994). This would mean that the
management would specifically look for potential candidates capable of team work as being a team
player would be crucial in any junior management position. Human Management resource approaches
within any business organisation are focused on meeting corporate objectives and realization of
strategic plans through training of personnel to ultimately improve company performance and profits
(Korsten, 2003). The process of recruitment does not however end with application and selection of the
right people but involves maintaining and retaining the employees chosen. Despite a well drawn plan on
recruitment and selection and involvement of qualified management team, recruitment processes
followed by companies can face significant obstacles in implementation. Theories of HRM may provide
insights on the best approaches to recruitment although companies will have to use their in house
management skills to apply generic theories within specific organizational contexts.
WHAT IS RPO?
Recruitment Process Outsourcing provides excellent benefits in the areas of Quality, Cost,
Service and Speed.
COST: Your costs can be significantly reduced because an RPO provider essentially uses
“economies of scale”. They are also capable of handling volume fluctuations in a much easier
way. For example, the RPO provider could allocate 10 recruiters to your company when volumes
are high and then easily shift them to another client when volumes are low. If you as a company
were to hire these 10 recruiters, you would either be forced to pay for resources that are not
being used or lay them off which involves overhead expenses.
SERVICE: A Recruitment Process Outsourcing (RPO) provider will help to streamline your
company's recruitment function and make it seamless and effective. RPO providers are equipped
to provide you with the best people when you need them and also take care of your ongoing and
future needs through greater employee retention and process control.
SPEED: “Time to hire” is a very critical factor in the recruitment process as this directly affects
business performance. A Recruitment Process Outsourcing (RPO) provider will find it much
easier to analyze their database and create a pool of candidates that is ready to be interviewed.
They need not take time to advertise for the specific job profile.
Recruitment Process Outsourcing is an end-end function. It begins all the way from designing a
job profile to charting the recruitment process and also developing orientation strategies once a
candidate is hired. It is not just restricted to hiring a specific person for a specific profile at any
time. It is about building a talent pool of resources that can be made accessible for your
company. RPO providers also go the extra mile to provide your company with valuable advice
and strategies on employee retention.
Recruitment Process Outsourcing has a powerful place in the market. RPO providers are well
connected to various companies and the job seeker market. They have a much larger and
attractive talent pool than any single company could possibly have.
Recruitment Process Outsourcing or RPO as the term is also referred to, involves the outsourcing of
select recruiting function or even the entire process related to staffing to a qualified and experienced
external service provider. At times, this function was only outsourced in the circumstance that the in-
house HR staff was over-burdened or unavailable for some reason to meet urgent staffing role-filling, but
increasingly there has been an added awareness about the many benefits associated with recruitment
process outsourcing, RPO has thereafter emerged as a top choice of market-savvy CEOs today.
Besides helping take over the numerous responsibilities of an in-house staffing solutions provider, the
external vendor chosen to transfer the recruitment process outsourcing RPO functions to often provides a
considerable cost-cut, faster turn around for the same work and more effective results since they are the
specialists in this field, handling volume staffing needs. They are also the ones keeping in touch with the
latest market trends in varied industries as well as staying updated on the modern management skills,
executive search tools and use of advanced technologies to stay atop HR related activities so they can
serve their client's virtual "recruiting department" better. Thus, it is no wonder that many companies based
abroad are choosing to go to cheaper countries like India , Canada , Ireland , China , Brazil , Philippines
for recruitment process outsourcing RPO with a cost-effective edge to it.
What kind of tasks does a Recruitment Process Outsourcing RPO Firm lend business support for?
First and foremost, it is important to have a potential list of recruitment process outsourcing RPO vendors
before you to cross-check their various benefits for your company's HRO needs. As a good, experienced
and quality provider of RPO services will be the best team support you can put your recruiting dollars to
good use by making the right choice the first time round; do look to see whether the organization of your
choice offers a wide networking range with other RPO specialists, a wide selection of industries they have
provided staffing solutions for or are simply concentrating on one or few categories only.
Such efforts need fresh human resources, maximum utilization of existing resources and to maintain
consistency among them. That leads organizations to look for alternate recruitment solutions to meet
this human resource requirement. Internet has changed the definitions of everything. These days whole
world has become a cyber village. Impact of globalization and technology advancement is easily visible
in every area. The evolution can be seen in the recruitment process of employees. It was one of
toughest tasks for organizations, but here comes the concept of E-Recruitment or online recruitment.
Whether you are looking for a job or looking to fill up a vacancy in your organization, the Internet is your
one step solution. Thousands of web portals are present to draw your attention with their unique and
effective functionalities. The main objective of these portals is to serve as a common meeting ground for
job seekers and employers, both locally and globally, where the candidates find their dream jobs and
recruiters find the right candidate to fulfill their needs.
Online recruitment makes data collection from job seekers easier and tasks get completed quicker. The
return on investment is immediate, simply because of the reduced time and increased ease of
recruitment processes. Online recruitment websites play a major role in simplifying the hiring process.
These portals two way functionalities: