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Sunday, 10 May 2020 00:00

Manpower Crisis in Indian Manufacturing and other sectors

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Description automatically generatedManufacturing requires stable manpower. The Manufacturing process has to be learnt by the team that is working on the shop. This includes the Workmen as well as the Staff. This team would eventually learn the process so well that they would be able to produce high quality products. Over years, the skill of these employees would become an Asset for the Company. I still remember the Shop Employees who used to just look at the Product and tell about the status of Quality of the product. They did not need any Quality instruments to check the Quality of the Product! That comes with involvement and experience. The relations among the employees was always harmonious. This is how the traditional Manufacturing used to work. Workmen used to join a company and they retire from the same company. 

 

But in the past decade, the Companies started exercising various options of employing people that focused on keeping them for a temporary period and getting rid of them when the demand is low. The care for workmen started coming down. The Migrant labor has become a major part of the Employees for many types of organizations. Not just Manufacturing. Even if you go to a Restaurant in any City, you would see only Migrant Labor serving you. They are there in just about every industry. 

 

The Workmen/Employees also are not having a great attachment to the Company as they know that they will be fired whenever the Market demand goes down. In many of the South Indian Companies the Supervisors / Managers do not even know the Hindi language that the Migrant Labor speak. There is no ‘relationship’ between the Company and the Workmen. Workmen go off on holiday whenever they want. They do not even care to inform their Company as there is no ‘relationship’.

 

Earlier even the MD of the Company would come to shop floor and be in continuous touch with the Workmen. There is always an emotional bond between the Employees and the Company. Now it is still there in some companies with permanent workmen. But almost every Company is employing temporary workmen in some form or the other. The Company does not have any relationship with these workmen. Workmen return the favor! 

 

Our observation is that there is no winner in this game. Both sides are suffering. Let us see how.

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Companies: Companies do have the option of firing the employees when the demand goes down. But they also cannot get the employees when they need. When there is huge Market demand and pressure from Customers, the Companies are not able to serve the full demand. Companies lose production for every major festival. Our observation is that Companies are losing the opportunity to do about 15-20% higher Top line just because they are not able to mobilize the people when they want. This is applicable to every industry. As the Employees do not have great attachment to the Company, the Quality of their work is not the best. Companies lose on this count too. The Quality losses due to this reason are at least to an extent of 3-5%. As there is high attrition, the Productivity of the Workmen suffers. Employees take a long time to come to 100% output level. Companies are losing about 30-40% output due to this. The nature of employment is one of the biggest reasons for the low Productivity of the Indian Manufacturing! Companies seem to simply ignore this and focus on short term gains!! Are there any gains at all? Companies are losing on Topline, Bottom line. Most of the Companies are in a hurry to show the short-term results and ignoring this elephant in the room! 

 

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Description automatically generatedEmployees: Employees can jump from one company to the other at their will. They are able to find jobs. But they also lose them at the drop of a hat! When the Economy is down or when a calamity like the current one happens, the Employees are undergoing unimaginable suffering. The fate of Labor in the current COVID-19 Pandemic is pitiable and it troubles the collective conscience of the Nation. The People who are making the Country move are moving on their feet for 1000s of KMs to reach their homes! Many are losing their lives on the way! Even in the normal times the Employees do not have a longer-term idea of their status. They do not know when they would be stopped by their employer. They do not have an idea of how they will educate their children, nor they have an idea of how they will build a house of their own and so on. 

 

So, who is winning? No one! There is a need for a larger solution that will take care of the interests of everyone involved and help India to improve the Productivity in its’ manufacturing. 

 

Here, we are suggesting a Solution to this Problem. 

 

We are not claiming that the Solution that we are proposing is the Best one. But we are pushing for ‘A Solution’. If the Powers that decide these Policies hear our voice, we will be happy. The current Government is having the Leadership and the mandate that are needed to take some bold steps! As a Country that is trying to step up to be a Developed Country, we need to address this area that is begging for attention. COVID highlighted many problems in the World. The issue of Temporary Labor in India is one of them. 

 

National Employment Grid (NEG)

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Today there are laws about Minimum Wages for every type of Industry. These are serving well. Government is updating them in line with inflation. So, we will not talk about how much to be paid. The Minimum Wages can definitely serve as the basis.

 

A National Employment Grid (NEG) for workmen should be formulated. This should be a Cloud based Grid that will allow every able person to register themselves as ‘willing to work’. To begin with this, Grid may serve the Workmen in every industry. It may cover the employees below a certain level in I.T and ITES industries too. 

 

An Indian Citizen should be able to register himself/herself on this Grid with some documentation to prove their Citizenship. They can denote their preference for the Place of work. They may indicate their experience or Training credentials. There are several Skill Training centers across the Country. The qualifications that these Centers give and the basic Educational Qualifications that they have will be updated on to the Grid. The additional training / experience data will be automatically updated on to the Grid from the Companies / Training institutions. The Grid may use the Aadhar card and the Aadhar number as UID. 

 

The NEG will address the following critical elements:

 

01.  NEG is a must: Every Company wanting to engage Workmen have to go thru only the NEG. No Company can recruit Employees directly. 

02.  Mobility of Workmen: The Mobility of Workmen across the Companies is not discouraged. It is left to the free will of the Workmen. This will ensure that they are not tied to a Company and they will be able to choose the Company that they will work for in the region of their choice. 

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Description automatically generatedWages: The Minimum Wages serve as the minimum Safety net from government. But beyond this, the Wages are determined by Demand and Supply in the respective regions. 

04.  NEG Core fund: Every Company that wants to use the Labor from the Grid will contribute a certain amount to the Grid for the Welfare of the Employees every year. This fund will be utilized for a few purposes that will be detailed later in this article. The Private Limited and Limited companies that have to spend on CSR will be encouraged to contribute to this Fund. Government may allow this as ‘spent on CSR’. The amount that a Company has to contribute will depend on their Turnover. The Companies that fire the employees most will contribute more. Those Companies that do not fire their employees will be asked to pay only a minimum amount. They will be encouraged to contribute more as it would be eligible as a CSR spend. 

05.  Unemployment allowance: The Companies can discontinue the employees when they do not have demand. But the Workmen will be paid a certain percentage of their Wages as ‘Unemployment allowance’. The amount of allowance will be directly related to the number of years of experience and Performance. 

06.  Annual Leave: The employees will be able to choose when they want to take their annual Long leave that may coincide with any festival of their choice. This will ensure that every Employees goes home, and it is not a surprise to the employer. Employer can balance their employees by taking those that have different preferences to ensure many people do not go off on leave at a time. 

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Description automatically generatedRecord of Employees: The Performance record of every employee will be uploaded by the Company on to the Grid every Quarter. The performance may be measured on the basis of few indicators such as:

a.     Productivity

b.     Quality

c.     Attendance 

d.     Discipline

08.  Independent Auditors: Government may appoint Independent Auditors to audit the whole system from time to time. 

09.  Skill Building: Government will open Skill Development Centers in partnership with Private Players to train the Workmen in various activities required in the Companies in various industries. 

10.  Continuous Education: Employees will be encouraged to continuously equip themselves with better qualifications. Government will subsidize the education through Skill Development Council. This will ensure that the Employees are upskilled in line with higher automation that will happen in every industry. 

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Description automatically generatedHousing and Education: The Employees will be provided with subsidized Housing and support for the education of their children wherever they are working. These benefits will be applicable to those Employees who fit certain conditions:

a.     Those who have a good Performance Record across companies that they have worked for.

b.     Longevity of their Service

12.  Higher wages for a Company that Is not able to retain its’ employees. A Company that is firing its employees frequently or not able to retain its employees as they feel the working conditions are not good will have to pay a higher Wage to attract employees.  While partly the demand and supply will take care of Wages, the Government may penalize those companies that do not take care of their employees.

 

While the NEG will be supported by Government and the Industry, the critical factors of how long the employer will retain the employees, how long will an employee work at a Company will be decided by the larger forces at play. A Company will be able to retain Employees for longer time if they take care of their employees. If they are firing the employees too soon, they will have to pay higher wages, they have to contribute more to the NEG Core fund and they may not be able to attract the employees like they are able to do it now as the workmen will have a support structure to find alternate employment. 

 

Employees will be encouraged to stay with companies and give good performance as that will decide whether the employee will be eligible for the Housing and Education benefits. Also, the next employer will take him/her only if there is good performance. 

 

Funding: How will the NEG get funded? How will this be a feasible option? How can Millions of employees get Housing and Education for their employees? We believe the contributions from the Companies and Government can make it happen. Companies will gain from this A picture containing person, clock, woman, holding

Description automatically generatedsystem more than they contribute as there will be a stability in the Workmen. While workmen can leave and join another company, he will be encouraged to stay in one Company as he will become eligible for Housing and free education for his children if he puts up good performance in companies. If the Companies pay a competitive Wage, they can retain good employees. 

 

Companies would gain in Top line, Bottom line (Productivity, Quality) by making NEG a success. 

 

A Stability will come about for the Companies as well as the Employees. The Longer-term objectives of both parties will be addressed by a NEG. 

 

We are sure that this suggestion can be improved in many ways. But we should look at solving this problem once and for all. 

 

With the current situation of hiring and firing, no one is winning! 

 

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