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Workers migration translating into increased wages cost

  Industries have now started feeling the pinch of workers migration.After lock down now it is workers unavailability that has started causing disruption in smooth operations. Reason is that most of the industries in last two decades have changed their entire manpower model. Slowly they have reduced the regular/permanent workers  and increased the numbers of contractual/ casual/temp/ third party roll workers which has over numbered the regular workers and industries became heavily dependent on them. This model was adopted to save wages costs.


Now when this bigger lot is out of industry, less number of regular workers are unable to take on the full production. In many industries ratio of regular vs. contractual is  as high as 20:70, say HR experts and managers who are on the task of managing the workforce.


 According to media reports ,Parle Products Ltd, one of India’s top biscuit makers, has been unable to run its units in Mumbai at full capacity for the past few weeks despite strong demand.


Many of the 30,000-strong migrant workforce employed at Parle or at its associate networks across the country have chosen to return to their hometowns instead of braving the extended lockdown in big cities such as Mumbai, where the number of covid-19 infections is yet to show signs of abating.


“We are a labour-intensive industry and a good part of our labour is migrant, so we are facing the same issue as others," said Mayank Shah, senior category head, Parle Products Ltd. “We are trying to manage operations through local labour, which is 60-65% of what we actually need," Shah added.


Companies across the board are facing an acute labour shortage, despite businesses slowly limping back to normalcy with the easing of lockdown measures. This is likely to significantly add to the cost of operations because of higher wages and suboptimal capacity utilization. Parle, for instance, said its labour cost will increase by 25-30%.

The pandemic-induced lockdown has impacted as much as 65% of manufacturing output, 60% of construction output, and 53% of services sector activity, according to industry estimates.


Other manufacturing industries have started planning incentive schemes for contractual labours to bring them back through contractor firms. Another problem would be unavailability of skilled labour who were employed for years and were equally skilled to produce in comparison to regular workers.  Employing new labour, training and skilling them  will not only a additional cost in terms of money but also loss of productivity.


 According to rough estimates India has 40 million migrant labour, of which 3 million have walked back to their villages, according to research firm Jefferies. States such as Maharashtra, Tamil Nadu and Gujarat, which are most dependent on output from industry and services and home to large numbers of migrants, are more vulnerable to output losses as they face restrictions on business activity because of higher number of infections. The mass migration of the this  workforce, estimated at 25% of the population in big cities, has affected business activity across the board.


Staffing firms are also in a fix. They are finding shortage of workforce. Some say that it will take at least 3 to 6 months to revive their confidence and trust which has broken during this lock down period.


 A contractor firm which has around 40 k labour force from different parts of country for providing mainly in auto sector admits that their 60% labour has gone back.


One HR professional admits that many contractor firms have not paid wages to their labour of lock down  period which has created sense of insecurity and fear of pandemic has accelerated their migration to home.