Flexible Approach: Contract hiring on the rise in IT and business process management sector

These contract staff numbers do not include those on contract for support functions like HR, recruitment, operations and finance; if they are included, the numbers would go up by at least 30%.

Contractual hiring is on the rise in the IT and business process management (ITBPM) sector as companies opt to stay flexible and keep the cost of overheads in check. At least 50,000 people are expected to be hired on a contractual basis by 2024, a substantial increase over the current headcount.

The changed circumstances post Covid-19, especially increase in employees working from home have forced businesses to rethink hiring strategies. Surveys by Han Digital, a talent consulting and fulfilment company reveal, contract employees could account for a fifth of all recruits.

Saran Balasundaram, founder & CEO, Han Digital, told FE most companies would need to add contract employees to be able to grow. Balasundaram believes 2021 will end with big contract staffing numbers as companies stay flexible to service short-lived contracts. This would also be true of multi-national companies looking to optimise their India count.

In FY21, the ITBPM sector added 14,486 contract staffers, a jump of 42% over the levels in FY20. That jump could be 50% in the current year taking the net additions to nearly 22,000.

The ITBPM sector’s full-time employee head count in FY20 stood at 41.4 lakh with 1.11 lakh contract staffers. The current year is expected to close with 47 lakh full-time employees and1.48 lakh contract staffers.

These contract staff numbers do not include those on contract for support functions like HR, recruitment, operations and finance; if they are included, the numbers would go up by at least 30%.

The churn is high. Off the pool of contractual hires, 15-20 % are relieved of their jobs in 3-9 months because of project closures. Another 20-25% are promoted to full-time employees while around 20-25% leave voluntarily as they get counter offers. Interestingly, demand seems to be matching supply.

Companies like the fact that the hiring takes a few weeks and that they can optimise headcount fill requirements for short term contracts. Moreover, there are cost advantages especially for junior or transactional positions, and the costs when releasing the resources are minimal. Job seekers too don’t seem to mind as it is an easy way to enter established companies, a chance to become a permanent employee and get a better salary, relative to the market median, in a short span. Experts point out a contract job is an opportunity to correct a below-the-market salary in 24 months.

Companies looking to hire contract staff include tier 1,2 and 3 ITBPM companies, global-capability companies, software product companies, pure play BPM companies, start-ups and Big4 consultancies.