How Bad Is Turnover Problem in India's BPO Industry?

Ann All

It's no surprise that attrition is a problem for India's outsourcing industry. I've been writing about it for more than two years now. Analysts closely follow hiring patterns at the country's outsourcing providers as one of their barometers for predicting financial performance. Some service providers are raising salaries to retain employees, as I noted late last year, which can drive up costs for outsourcing clients.


So how bad is the problem? According to a new report from the Hay Group, India's BPO industry suffers from an attrition rate of 23.5 percent, the highest of any sector in the country and more than 7 percent higher than the average attrition rate of 15.7 percent.


Hay Group faults the industry's remuneration model, which includes few short-term rewards and instead emphasizes long-term benefits such as pension funds, reports The Economic Times. Short-term incentives account for just 4 percent of total remuneration at BPO companies, says Hay Group, vs. an average of 10 percent in India's other sectors. Other contributors to the problem: long working shifts, a lack of career development and monotonous tasks.


Hiking up salaries won't solve the attrition problem, according to the report. Instead it recommends providing a better balance of short- and long-term benefits such as performance bonuses, employee stock option plans and retention bonuses; effectively communicating details of compensation plans to encourage employee buy-in; and promoting non-financial benefits such as career development, job rotation and transparent performance management systems.


Says Oscar De Mello, country head of Hay Group's Reward Information Services in India:

Contrary to belief, adjusting pay need not automatically lead to higher operating costs for BPO companies. By creatively designing their total reward package towards more short-term incentives and benefits, and linking the package to performance, companies can ensure that they get higher productivity without hefty increases in salary costs and minimize attrition costs and issues at the same time.

India's government is acutely aware of the attrition issue, which is why it has introduced several initiatives to create BPO jobs in rural areas of the country.

Subscribe to our Newsletters

Sign up now and get the best business technology insights direct to your inbox.


Add Comment      Leave a comment on this blog post
Jan 31, 2011 11:49 AM bradwilliams bradwilliams  says:

India's BPO industry has evolved and matured to present higher-end services that require judgment-based analysis and domain expertise, rather than function-specific, rules-based performance parameters alone. As service providers strive to offer end-to-end services, we see BPO falling into different segments. At one end of the spectrum is the traditional rules-based transactional outsourcing; while at the other end is judgment-based transaction processing and full-service business process outsourcing.

India has won its spurs as the world's outsourcing destination of choice. Currently the country has a commanding share of the global outsourcing market.

India is undoubtedly the most favored IT/BPO destination of the world. This raises the question why most of the big MNCs are interested in outsourcing their operations to BPOs in India. The answer is very simple- India is home to large and skilled human resources. India has inherent strengths, which have made it a major success as an outsourcing destination. India produces the largest number of graduates in the world. The name of India has become synonymous with that of BPOs and IT industry hence the name BPO India.

Besides being technically sound, the work force is proficient in English and work at lower wages in comparison to other developed countries of the world. India also has a distinct advantage of being in a different time zone that gives it flexibility in working hours. All these factors make the Indian BPOs more efficient and cost effective. In order to meet the growing international demand for lucrative, customer-interaction centers, many organizations worldwide are looking to BPO India.

A subset of outsourcing, Business Process Outsourcing (BPO) involves contracting the operations and responsibilities through a third party service provider. From the last couple of years, the BPO industry has evolved as the most substantial sector in the Indian market. India has emerged as the most favored location for all Bpo services across the globe. This has accelerated the Indian economy to the heights, progressively boosting the statistics depicting the growth in the years to come and it has been however forecasted that by 2020, more than 80% of the world of business process outsourcing services will be served by the Indian companies. Marked as the best place to attain superior quality services globally, the BPO industry is strengthening its foundation in India.


Aug 23, 2011 10:41 AM Business Outsourcing Solutions Business Outsourcing Solutions  says:

India has a remarkable share in the outsourcing industry. The BPO companies have to maintain the quality of services and for that they have to pay fat packages along with perks. Indian work force gets minimum wages or packages compare to other countries.


Post a comment





(Maximum characters: 1200). You have 1200 characters left.




Subscribe Daily Edge Newsletters

Sign up now and get the best business technology insights direct to your inbox.

Subscribe Daily Edge Newsletters

Sign up now and get the best business technology insights direct to your inbox.