When temp hiring becomes an increasingly permanent fixture in Indian companies

India’s job market is witnessing a significant shift as companies scale up contract hiring across the hierarchy—beyond the usual festive-season recruitment—as they beef up staffing to take on new projects and control their employee costs.

According to staffing experts Mint spoke with, contract hiring is expected to increase by 20% over the next few months, creating600,000-700,000 jobs across the organized sector.

This demand for workers on contract for 6 months to a year comes at a time when project visibility is low amid uncertain global economic conditions and wars, making companies reluctant to hire employees at high pay scales.

Contract employees are typically paid lower than regular staff and remain on the payroll of a company’s recruitment vendor. As a result, companies do not have to incur additional employee costs such as contributions to their retirement corpus.

“Overall consumer spending is low and permanent recruitments in BFSI (the banking, financial services and insurance sector) for areas like gold loans are low. Companies are not hiring backfills and would rather recruit contract employees in one-year roles," said Kartik Narayan, chief executive officer-staffing at recruitment firm TeamLease Services Ltd.

“FMCG (fast-moving consumer goods), e-commerce, quick-commerce are the main drivers behind the 18-20% year-on-year growth in contract staffing," Narayan added.

Divya Kurup, business head-staffing at recruitment firm Xpheno, sees an 18-20% increase in hiring for seasonal talent as compared with 2023.

“We estimate the total staffing demand for the season to be in the 6-7 lakh (600,000-700,000) range across India. The estimated demand covers the season beginning October and going well into January and early February," said Kurup.

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A rising trend

Manu Saigal, director of general staffing at Adecco India, a job consultancy, attributed the increase in contract hiring this year to multiple factors.

Companies typically maintain a permanent-to-contract staff ratio of 70:30 or 50:50, and if they need to staff up for short-term projects, they prefer to fill positions in the contract segment first, explained Saigal.

Also, companies are expanding in smaller cities via franchise operators. And since there is little uniformity in the quality of talent and payroll structures between franchises, companies prefer to engage a staffing firm that will hire employees on contract and run the entire human resources and administration process uniformly, he added.

Lohit Bhatia, president of workforce management at staffing companyQuess Corp., added that the uptick in contract hiring was due to a large chunk of informal workers—such as in agriculture and construction—transitioning to formal employment. Such workers are looking to be part of a company where they draw provident funds, gratuities, and statutory benefits, Bhatia said.

There is another reason for the increase in contract hiring. “Today, e-commerce, quick commerce, manufacturing, and non-banking finance companies (NBFC) are aggressively looking at smaller towns. There, they open franchise models and, instead of permanent hires, take in contract staffing," Bhatia added.

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“Yes, it has gone up," said Angshu Mallick, managing director and chief executive of Adani Wilmar Ltd, referring to contract hiring at the company, which sells edible oil and wheat flour under the Fortune brand.

“When you expand distribution and you have to reach directly, then you need people… Every week, we have to go to the outlets. Every 200 outlets need one person, and every seven-eight people need one supervisor. As you increase the number of outlets, the number of people on the street increases and so do their supervisors," said Mallick.

Adani Wilmar’s hiring of sales staff on contract has increased significantly over the last two-three years, especially in smaller towns and rural markets. In all, the company reaches over 780,000 outlets directly and another 2 million outlets indirectly.

“Within urban distribution, we are by and large there at 65-70% (in terms of permanent-to-contract staff ratio)," Mallick said. “But tier 2 and tier 3, and then rural is growing for us, we have enhanced our feet on the street there."

A rush across sectors

The festive season is another factor that has led to a rush in hiring workers on contract for a few weeks to a few months—an annual ritual now.

Quick commerce, e-commerce and other consumer-facing firms are rolling out daily incentives, overnight additional payments, and bonuses based on attendance during the festive season to keep up with the increase in shopping.

But the trend had surfaced even earlier. According to a report by the Indian Staffing Federation, an industry body representing more than 100 recruitment firms, India’s general flexi-staffing or contract staffing industry saw employment growth of 19.1% in April-June as compared with the same year-earlier period.

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Technology companies and global capability centres—or GCCs, the India-housed tech units of multinational firms—are also signing up for temporary manpower, although they were not keen on contract workforce in large numbers earlier.

“The macro visibility is poor and our IT and GCC clients now want contract workforce," said Anshuman Das, chief executive and co-founder of Careernet, a talent solutions provider. “The notice periods of contract workforce are often of few weeks versus 2-3 months of permanent employees, and they can be recruited immediately."

GCCs scouting for employees in the initial stages of setting up base in India may prefer contract employees over permanent manpower, Das said. As for technology firms, several have used up their staff to almost full capacity and may need additional manpower quickly.

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Suneera Tandon contributed reporting.