The Hindu Business Line : Attrition costs weigh down BPOs: Study

THREE-FOURTHS of what is shown as wage costs in a business process outsourcing (BPO) firm could be monies paid not so much for the work put in by its employees, but actually towards costs of hiring, training and rehiring.

A study by the Indian arm of Hay Group, a global HR consultancy firm, has shown that employee turnover costs in low-end voice-based process firms are about 76 per cent of their annual salary costs working out to more than nine months' annual compensation.

"We didn't realise it was this much," exclaimed an HR head of a Bangalore-based BPO firm, when asked to comment on the rising attrition costs in the industry.

This, of course, includes the cost of recruitment (12.2 per cent working out to almost 1.4 months' salary), cost of training (25.2 per cent working out to three months' salary), low productivity (two months' salary) and organisational knowledge (2.5 months' salary).

Replacement clause: BPOs are, of course, making recruitment agencies more accountable and have put replacement clauses in place.

This means any employee exit before 60 days has to be made good with another suitable candidate.

Ms Kavitha Reddy, Vice-President, TeamLease Services, a Bangalore-based recruitment and staffing solutions company, confirms that most BPOs do put in a replacement clause with a time frame of 2-3 months.

Their BPO clients do not seem to mind.

In fact, Adecco Peopleone Consulting, also a recruitment and temp staffing company is already working on reducing this to one month.

Says its Managing Director, Mr Ajit Isaac, "BPOs are now realising that attrition is more an internal issue so they have not objected to us reducing the timeframe."

Referrals: He also points out to another issue that BPOs are now facing:

They are now recruiting through other channels such as referrals, thus, making employees themselves more accountable.

Of course, organisations such as ICICI OneSource have found referral programmes impart more effective results in recruitment and retention, according to a company spokesperson, clearly indicating that candidates feel morally obliged to stay longer if the entry is through an associate.

Time for temps: But Mr Isaac argues, "High attrition costs only shows that there is a clear case for temp staffing, where staffing solutions companies are responsible for keeping the seats filled at any point of time."

The Hay Group study also found that if companies can put a lid on rising training costs, it could mean better bottomlines.

"This could be done in various ways: hiring graduates of BPO focussed training companies, self-paced language courses while studying, staggering of training over time, select standard modules across sectors, and so on," says Mr Nitin Aggarwal, Head of Technology Practices at Hay Group India.

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