Welcome to WealthWisdom, the economy and investment knowledge blog! Enjoy reading and do sign up as members, before logging off! Feedback on the blog welcome on email@example.com.
Tuesday, June 13, 2017
The waning days of Indian IT workers being paid to do nothing
The bench, the Indian IT industry’s resource bank, is thinning.
For long considered a key strength of India’s tech majors, the bench is losing its relevance even as just-in-time contract hiring is gaining popularity. More companies are hiring techies on relatively short, fixed-term contracts, rather than employing them full-time even when there are no projects.
Automation, creeping unionism, and a global closing of borders for techies have in recent times accelerated this process. So much so that the average IT company’s bench strength has progressively fallen from between 8% and 10% of the billable employees to between 4% and 5% now, human resources (HR) experts believe.
So what exactly is happening?
What is the bench?
In the IT industry, the bench refers to the section of a company’s employees that isn’t working on any project for the time being but remains on the rolls and receives regular salary.
“The best way to answer this question is with an analogy…In football or cricket there are only 11 players allowed on the pitch/ground. So there are 5/6 players out as subs ready to come on in case of injuries. These players usually sit (or at least used to) on a bench and hence the expression ‘Sitting on the bench,'” Bhavish Parkala, a developer with General Electric, posted on Quora.
It is, indeed, a bank of personnel. (Interestingly, the term “bank” itself comes from the Italian banchiere, the foreign exchange dealers of 14th century Italy. They were called so because they “did their business literally seated on ‘benches’ behind tables in the street,” Nial Fergusson writes in his book The Ascent of Money.)
This bank could consist of fresh graduates or senior techies. A person could spend anywhere between a couple of weeks to up to six months on the bench.
“At Infosys, we have a small percentage of employees on bench at all times…This is a planned period where the employee gets time to learn as well as focus on some internal initiatives,” Richard Lobo, EVP & head of HR at Infosys, told Quartz in an email.
This is largely an Indian phenomenon. After all, Indians tend to prefer secure full-time jobs over contract positions. In other places, people don’t hesitate to take up short-term projects, says Alka Dhingra, assistant general manager at staffing firm TeamLease Services. So, companies don’t have to hire full-time employees and then bench them when there are no projects.
The bench, like a hologram, looks different from every angle.
For IT firms, it is often an important factor their clients consider. A strong bench is an indication that the firm has ready resources and can begin execution immediately. But having too many people on the bench doesn’t reflect well either. It would mean employees are underutilised, and this would impact the profitability of the firm. Firms rarely speak about their bench size and are always working towards high utilisation rates.
As for employees, some say it is fun initially—you get paid to do nothing and have the opportunity to learn new skills, prepare for projects or for competitive exams. But fatigue sets in soon enough. “I spent around 16 months (on the) bench. Initially it was like getting paid to enjoy the life…It takes some time to figure out the company is not responsible for your growth,” Indira Raghavan, a techie, wrote on Quora last year. In recent times, with layoff fears lingering, not having a project to work on could be reason enough to lose your job.
Meanwhile, companies have been actively working at improving utilisation rates. “Earlier 30% of employees were on the bench and utilisation ratio was about 70% . This has now gone up to 80-81%,” Kris Lakshmikanth, the managing director at recruitment firm Head Hunters India, said.
Vishal Sikka, CEO & MD of Infosys, India’s second-largest IT services company, said last year that he was pushing automation to reduce bench strength. “Despite being here (at Infosys) for 18 months, I can’t still find an answer around the idea of a bench,” Sikka had told the Business Standard newspaper (paywall). Zero Bench is an initiative Infosys launched in 2015 to help employees find short-term assignments. Under this, employees who have tasks to perform can post their requirements based on their projects and benched employees can sign up to help finish the task. According to data from Infosys’s annual reports, the company’s utilisation rate (which refers to the part of the workforce actively working on projects and not on the bench) for the financial year 2012 (pdf) was 76.6% and this went up to 81.7% in the financial year 2017 (pdf).
Infosys isn’t alone. “All these (IT) companies have a resource management team which links bench people and internal teams to different projects and mobilises the bench people to different projects,” Dhingra of Teamlease said.
The beginning of the end
Now, IT companies are increasingly seeking “just-in-time” employees on contract, and industry experts see this as a trend that will replace the bench.
The idea behind having a bench was to ensure that employees are available to start working on projects as soon as the customer assigns a task to the IT firm. Instead, now they are seeking techies who can come on board in quick time only for specific projects, after which they either move on to other jobs, join the same company’s next project or, at times, get absorbed into the company as a full-time employee.
HR experts believe contract employees are a better alternative to the bench. They are as effective in terms of deployment, they help cuts down costs, the company can pick professionals with better skills, and, finally, helps the companies avoid mass layoffs and subsequent protests.
In their latest annual reports, IT firms Wipro and Cognizant say that “profitability could suffer” if “favorable utilisation rates” are not maintained.
“All IT companies are under cost pressures now,” Lakshmikanth says. So, hiring techies only when they’re needed makes sense. Most companies pay contract workers more than they would other full-time employees—about 20% more, according to Lakshmikanth—but this would still economical compared to having a large bench.
“Contingent hiring would be the way forward across the industry…Typically, contract employees will be the virtual just-in-time bench,” said Thammaiah BN, managing director of recruitment services company Kelly Services India.
While Indian techies still prefer full-time jobs, acceptance for contract-based employment is rising. It is seen as an opportunity to first get one’s foot in and then get absorbed into a company. Then there’s the advantage of getting good brand names on one’s resumes, learning new technologies, and gaining knowledge and experience, Dhingra pointed out.
Besides, it is good money. IT firms pay contract employees more than the regular employees. So, for someone who is benched, between jobs, or just out of college, contract work is a good deal. Of course, there are drawbacks, too. “Recession? Layoff? Contract employees are the worst hit,” says Shashank CG, a software engineer.
Nevertheless, life’s never going to be the same on the bench.