Varying Minimum Wages May Hit Rural BPO Push

Minimum Wage, Maximum Damage Issue of minimum wage has been a contentious one for BPOs wanting to expand to non-metros

The government's plan to push the business process outsourcing (BPO) industry to expand into non-metro and rural areas could trip on a long-standing issue -varying minimum wages across states.

“The challenges come from domestic BPO margins being very low, and managing attrition, which is as high as 80% in the sector,“ said Sonal Arora, assistant vice-president at recruitment firm TeamLease Services.

While there are no special minimum wages prescribed by the government for BPOs, a domestic BPO would come under the classification of a commercial establishment, said Arora, and since BPOs are no longer offering only voice services, companies incur significant cost in training, on-boarding and hiring people for specialised skills.

The issue of minimum wage has been a contentious one for BPOs wanting to expand to non-metro cities, because they feel the minimum wage in smaller towns should be linked to the cost of living, as opposed to a fixed figure across the state.

For example, the minimum wage for a “general worker“ in a commercial establishment in Karnataka is Rs.6,517-6,985 per month. So an employee in a tier-2 city , such as Gulbarga and a tier-1 city such as Bangalore, will have to be paid within this range.

Companies are looking to move to non-metro cities so that the overall cost of operation can come down, said KS Viswanathan, vice-president at Nasscom. However, they invest significantly in imparting the requisite skill set to the entry-level hires in non-metro locations.

“We are willing to pay minimum wages provided states pitch in to increase the skill set of workers or give us the support in skilling people,“ he said.

Keshav Murugesh, group CEO of WNS Global, said, “There is a perception that BPOs pay very low. The reality is, if you're coming in as plain vanilla, you have to be paid like plain vanilla. But if you're coming in as a specialist, then obviously the starting salaries will be much higher.“

The government has earmarked . 493 crore for the “India BPO Promo` tion Scheme“, and the department of electronics and information technology (DeitY), which is administering the policy , has capped the subsidy per seat at Rs.1 lakh.

The Economic Times, New Delhi, 30th Sept. 2015

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