India loses the charm of cheap labour

The recent move by UK- based telecom outsourcer New Call Telecom to move its call centre from Mumbai to the UK is another sign of India's advantage of cheap labour losing its allure.

New Call Telecom, which started the call centre in Mumbai three years ago, said that it chose to shift base to Lancashire as it feels that labour is cheaper in that country than in India. The shift will create around 25 jobs in the UK with the figure rising to about 100 in a couple of years.

The move by New Call Telecom, which provides broadband and telecom services, is not the first such. Two years ago, British Telecom shifted 2,000 call centre jobs from India back to the UK. This is a far cry from the days when companies from countries such as the UK and the US outsourced jobs to offshore locations in India as they had to pay staff less here. However, with salaries in India rising fast, some companies are finding it difficult to maintain profit margins.

Salaries in India Inc are set to rise by 12.9 per cent on average in 2011, according to a report by global human resource firm Aon Hewitt.

"Inflationary pressures and high attrition rates are major challenges for the Indian outsourcing industry. Indian companies are responding to these by starting their operations in Tier- II and Tier- III locations and by introducing employee engagement practices," said P. Vijayakumar of the Center for Social and Organisational Leadership ( CSOL) at the Tata Institute of Social Sciences ( TISS).

"The cost advantage depends basically on the effect of exchange rates and whether we are in a position to provide the skilled personnel needed by the industry," explained Vijayakumar.

The cost of renting space for business has also increased to the extent that it is now as costly in India as in the UK or some other nations, according to media reports.

Nigel Eastwood, New Call's chief executive officer ( CEO) told Daily Mail that, "Salaries in India aren't that cheap any more. Add to that the costs of us flying out there, hotels and software, and the costs are at an absolute parity." However, Amit Nivsarkar, vicepresident, Nasscom, said, "This is not any general trend that we have seen. The company policies to relocate may be behind such instances. Salaries at the entry- level are not issues in such cases as they haven't increased for the past three years." It is, however, not only firms from the UK and the US but also Indian IT companies that are hiring people in other countries in search of cheap workforce.

"Labour and realty rates vary from place to place even in India," said Viral Thakker, executive director at KPMG India, a business advisory firm.

Firms now aim to get a good talent pool at a low cost and will move to wherever they can achieve this goal, said Thakker.

Reproduced From Mail Today. Copyright 2011. MTNPL. All rights reserved.

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