Companies push towards workforce formalisation

An increasing number of companies in sectors such as fast moving consumer goods (FMCG), consumer durables, healthcare and pharmaceuticals are pushing towards formalising their workforce, according to a report based on a study by staffing firm TeamLease.

The report on ‘Reinventing business with workforce formalisation’ highlights that 59% of companies across these industries intend to formalise the informal part of their workforce. This cohort includes 37% companies from FMCG, 36% from FMCD and 27% from healthcare and pharmaceuticals sectors.

A large number of the employers cited that managing an informal workforce has become extremely challenging with 45% stating that the primary challenge is to manage wages, while 21% employers find persistent skill gaps among the workforce. About 15% of employers have also cited frequent absenteeism as a challenge.

“Over 90% of our workforce is still informal. This is concerning not only from a macro economic standpoint but has also become an everlasting impediment for businesses,” said Balasubramanian A, Vice President and Business Head – Consumer and Healthcare, TeamLease Services. “Through the pandemic, organisations dealt with a new slew of challenges, much of which continues today. Hence, companies have been reinventing their business strategies, and formalising the workforce is a key constituent in this journey.”

The survey was conducted with 230 employers across these sectors. The “intent to formalize” is defined as the proportion of the employers (across and within sectors and cities) that are willing and able to formalise their workforce.

The study highlights that 31% employers acknowledge that informal workers face many limitations due to the absence of social security. On the other hand, 21% believe that wages are low and 25% cite that there is a lack of medical and leave benefits.

“Across sectors like FMCG, FMCD and healthcare & pharmaceuticals, employers have started taking cohesive steps towards formalisation. 65% of companies feel that managing an informal workforce is challenging. As a result, the majority of companies, about 56%, are prioritising formalisation with third party payroll,” said Balasubramanian. While 64% of companies have already initiated major steps, 67% are planning to implement within the year. “Now, with conducive steps being taken towards simplifying labour laws under the new labour code, formalisation is going to become a mandate rather than a choice,” he added.

Nearly half, which is 43% of the employers surveyed, treat formalisation as a priority. Employers of large organisations (about 80% of the large cap companies surveyed) have already initiated major steps towards creating a formal workforce.

From a job role point of view, 29% of the employers expressed the intent to formalise the role of sales executive. Employers are also keen to formalise profiles like electrician, community health worker (9% each), marketing executive (7%) and supply chain executive (5%).

However, there are still 24% of employers who do not consider formalisation as an immediate priority. One of the primary reasons for this is that many employers (46%) feel that the process has complex statutory requirements and is cost heavy. However, for India to create high impact employment and in the journey of putting India to work, formalisation of the workforce has become the imperative need of the hour.