Retention up, Hiring down in India's Outsourcing Sector


The slumping economy has apparently done what salary increases, training programs and other incentives couldn't: keep more employees of Indian outsourcing companies on the job.


As I wrote in September, attrition has long been a problem for the country's outsourcing industry. According to a 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.


And that was down from a rate of 35 percent in 2007, reports livemint.com, which goes on to note that turnover in the BPO industry dipped below 20 percent in 2008's third quarter. At Genpact, which the article calls "an industry benchmark," the attrition rate dropped from 31 percent in 2007 to 24 percent during the first half of this year.


The company's head of human resources, Piyush Mehta, credits the chilly economy, rather than any actions his department has taken, for the improved retention rate. He said:

I don't want to completely exclude what we have done, but it is mostly the market impact.
With employees hanging around longer, says Mehta, Genpact is finding it easier to fill new roles through internal promotions. BPO specialist Convergys is seeing a similar uptick in internal promotions. However, says that company's recruiting director, a lower attrition rate is also making it tougher to recruit new hires. Convergys is beefing up its advertising, providing incentives to employees who provide referrals, and offering training sessions for canddiates who don't make the cut in their initial efforts.


The industry expects to add fewer new employees in the fiscal year ending in March 2009, reports PCWorld.com. According to the National Association of Software and Service Companies (Nasscom), the industry will hire 200,000, down from a projected 276,000. That's 50,000 fewer than the number of new workers hired in fiscal 2007. The figure includes both Indian outsourcing specialists and multi-nationals like IBM and Accenture.


Like the improved attrition rate, the drop in hiring appears largely due to poor economic conditions. While giants like Infosys and Tata Consultancy Services are still adding staff, Nasscom Chairman Ganesh Natarajan says smaller outsourcing companies are having difficulty obtaining the funding needed for expansion. Indian companies now expect the economic slowdown to last up to 15 months, says Natarajan.