Hiring, Terminating and Retaining Employees in India

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India Briefing · Issue 30 · February 2016
Best Practices for Attracting
and Retaining Employees
in India
India is a leader in labor cost competitiveness.
Although still behind Vietnam, where labor costs
average US $0.83 per hour, India’s US $0.92 per hour
is competitive, and compares favorably to the $3.52
for the same hour in China. India’s labor rates also
compare favorably to Indonesia, where labor costsUS
$1.70anhour. Indiahas becomea favoreddestination
for employers due to these lowwages.
India is also one of the largest producers of human
capital in theworld. India has an estimatedworkforce
strength of 450 million – with an average age of 23.
Although graduation rates are difficult to obtain,
government accredited universities reported over 23
million students enrolled in 2014. More generally, the
country hosts the second highest number of English
speakers in the world, as well as a largemulti-cultural
and aspirational workforce enabling flexibility for
employers and customers.
Despite the lowcost of labor and large labor pool, the
competition for talent is becoming increasinglymore
competitive. Senior executives in the information
technology (IT) and business process outsourcing
(BPO) industry, for example, assess competition for
graduates as ‘high’ in many Tier 1 cities – turnover
rates can surpass 25 percent in these cities, while the
national average for the industry currently hovers
between 15 and 20 percent. Manufacturers, on the
other hand, often struggle to source experienced
management teams andskilledworkers. In some less-
developed areas of the country, local power brokers
seek toexert influenceover blue-collar labormarkets.
Best Practices
Given thisdiverse, rapidlydevelopingandcompetitive
labor market, employers need to place an increased
level of importance on working conditions to attract
and retain employees. Labor experts have identified
the following factors as prominent considerations for
Indian professionals.
Career Growth Prospects
Graduates andprofessionals are drawn to companies
that give year-on-year promotions and don’t have
mandatoryminimumexperiencerequirementsbefore
awardingpromotions.This low-ceiling for promotions
ispartlya reflectionof thecompetitivenessof the labor
market – most competent professionals are able to
leverage their experience to engineer promotions
with competitors. Beyond annual promotions, many
professionals in India prefer workplaces where merit
is rewarded as frequently as possible and long-term
growth prospects are strong.
Financial Compensation
HR professionals often note that compensation
packages are a significant factor after career growth
prospects. Many Indian professionals consider their
compensation package as a key factor influencing
their decision to join a company, remain in their
position or change careers. In order to attract and
retain the best talent, companies should plan to
offer salaries that are at least 10 percent higher than
competitors in the locality.
EXPERTCOMMENTARY