By Balasubramanian A
Skill, labour, talent for MSMEs: Over the last few decades, the small and medium enterprises (SME) sector has grown quite dynamically in India, contributing over 40 per cent of the country’s exports and creating millions of jobs annually. The sector comprising a diverse set of economic activities, enterprises and jobs stood at 63 million SMEs in 2020, a number which is only growing. Yet, it is often the least supported segment in India. Often bootstrapped and facing a lack of resources, despite being amongst the largest employers, very few SMEs have a staff management system and this often interferes with their overall growth.
SMEs often struggle with labour and workforce management. The reasons largely lie in the lack of social security for blue-collar workers functioning in a rather competitive wage market. SMEs often find themselves faced with huge employee turnover, absenteeism, skill gaps, training, payroll management and finding workers, recruitment and related issues.
At the same time, the blue-collar workforce employed by most SMEs is faced with a lack of social security, any leave benefits, health and medical facilities, as well as training and skilling opportunities. Also, they have no avenues to showcase their skills or talent.
The call of the hour is a need for workforce formalisation made even more urgent following a devastating pandemic that has upturned the business of many SMEs. With technological improvements, a lot of this management has been made easier by talent and workforce management firms. One way to approach workforce formalisation is via an acronym aptly termed GAPS. This entails–Ghost Employee Elimination, Attrition Reduction, Productivity Enhancement with Tech, Statutory Compliance or in other words, a holistic framework that can help SMEs with their workforce management. This model stands out as a real disruptor towards creating not just an inclusive workforce but also formalising it to open a world of opportunity for both the workers as well as SMEs.
To begin with, there is an urgent need for assured adherence to statutory compliance norms to ensure that social security benefits mandated by the government are being provided to their workforce. This includes things like provident fund and ECIS. SMEs hold a lot of potential for economic growth and employment creation. In order to improve compliance, SMEs need legal, financial and logistical expertise. Improving compliance with labour legislation will only lead to improved talent quality, especially if clubbed with measures that help small enterprises grow such as registration, access to credit and property benefits and fair taxation.
The next related step will require SMEs to onboard a third-party management tool that can help with workforce management. The database can manage staff attendance, payroll, keep tabs on absenteeism and ensure productivity. This will help with not just productivity enhancement but also ghost employee elimination, a major scourge for unorganized SMEs.
Another way to enhance productivity would be in the form of training and upskilling workers to operate new digital tools that nearly every SME can benefit from to improve sales, manage inventory, measure productivity and open new marketing opportunities. A secure workforce will have a positive impact on not just attrition reduction but also on sourcing skilled and qualified talent, which becomes a big challenge for SMEs in a competitive market.
All of this is possible with the help of a new breed of staff management firms that are looking at formalising the vast blue-collar workforce space that has hitherto been marginalized.
Benefits
As mentioned above, sourcing and retaining talent is a major challenge for SMEs. The GAPS framework will address all the gaps quite holistically and affirmatively for both the business as well as the employees. From the employee’s perspective, it is only natural that they would want to associate and work for a progressive company that looks after its workers and is forward-looking and inclusive. Retirement, leave and medical benefits will create a long-term workforce that is loyal. This saves cost and time on constantly hiring and training staff only to find that they have moved on. Formalisation measures will help retention as the employees feel valued and motivated to contribute to a firm’s growth. This will enable SMEs to catalyze their growth much like startups wherein they will find getting credit and investments much more easily.
Using the GAPS framework for workforce management has manifold benefits. The third-party workforce management system that makes the bedrock of GAPS also enables more effective staff scheduling as it can keep a tab on workload fluctuations while identifying potential gaps in coverage. So, for instance, they can help SMEs plan for busier periods like festivities well ahead of time.
Cost versus RoI of implementation
It is often believed that wage market costs save money for small business owners. However, a quick comparison reveals that not only is minimum wage at par with market costs, a lot of times, the total pay meted at market rates, works out much higher than the minimum wages applicable and with the social security benefits missing. If SMEs were to look at it objectively, there is no extra cost, just a marginal 10 per cent increase for providing social security benefits like PF, ESI Coverage etc.
However, providing these does not just ensure direct benefits are received by employees, it also helps with everything GAPS stands for. It has been seen in a lot of organizations that with statutory compliance — employee retention improves manifold, and attrition reduces by as much as 30-40 per cent. Not only this, it is seen to act as a turbocharger towards increasing productivity at factories and offices.
As SME owners work on ways to recover and decide how to adapt their processes so that they survive and thrive in a climate of post-pandemic change and uncertainty, workforce formalisation under the aegis of GAPS might just provide the much-needed solution and fill in the gaps.
Balasubramanian A is VP & Business Head at TeamLease Services. Views expressed are the author’s own.
