India is placed in a sweet spot to draw its demographic dividend as the economic engine is moving into top gear after recovering from the shocks of lockdowns during the Covid-19 pandemic. As India’s population overtakes China’s, the country with over 1.4 billion people and nearly two-thirds of the total—or close to 1 billion working-age citizens—makes for an unprecedented source of human capital in the coming years. This would create a lot of growth potential for India’s staffing services companies, especially those who are playing in the temporary, or temp, staffing field.
In fact, the industry’s top players stepped up their game in 2022. Quess Corp and TeamLease added 1 lakh people to their headcount in the first nine months of 2022 and are poised to close the calendar year by taking this number beyond 1.25 lakh, around 18-20% of their total headcount, having been added this year alone.
Here’s a snapshot of how market leader Quess Corp has been adding to its staffing headcount
The company has nearly doubled its strength since the pandemic broke out. This more than made up for the 18-month period when the headcount declined and then stayed flat.
The company expects to surpass 1 lakh net additions in 2022, more than doubling the number in 2021. Indeed, in the April-September period alone, it added more to the headcount than it did in 2021. This was led by BFSI and retail sector employee deployments.
If we look at how the firm has been doing in terms of productivity from its core employees, in terms of the ratio of staffing services associates per full-time employee, the company has managed to up the quotient.
In the pre-pandemic period, this ratio hovered around 330. This sank to around 316 with the onset of the lockdown. But it has shot up to around 430 over the last few months as the company went on a recruitment drive.
Here’s a snapshot of how TeamLease added to the staffing services headcount in 2022
TeamLease has not grown as rapidly as Quess over the same time period. While it had its moment of glory in 2021 when it added more people than its bigger rival (61,000 as against 51,000 of Quess), it has seen a slow movement in 2022.
Net additions in the first nine months of the year have shrunk to 28,000. Even if it matches the numbers in the fourth quarter as the corresponding period a year ago, it is unlikely to reach the net additions of the previous year in 2022.
Meanwhile, the firm had also seen a pick-up in its associate-to-core employee ratio at the onset of the pandemic. This allowed it to catch up with Quess on this parameter. Indeed, as its bigger rival saw a sharp jump in the ratio last year, TeamLease, too, saw a spike.
However, unlike Quess, which has more or less maintained the ratio over the last four quarters, TeamLease has seen this ratio tapering out as its net additions have declined in 2022.
During the investor concall after presenting the financials for the quarter that ended September 30, Ravi Vishwanath, Quess group’s CFO, said, “Our IT staffing business saw a headcount decline of about 300 during the quarter. The slowdown in IT hiring has increased the cost pressure on our clients while the cost of acquiring a candidate has not gone down. In addition, this is the first time we have witnessed a delay in associate onboarding with the client. This has created a bench of around 100+ associates.”
On the flip side
Notwithstanding the rise in the overall headcount of the two staffing services majors, they have issued some worrying signs. The common problem flagged by both companies in 2022 has been the decline in the IT staffing business.
TeamLease said its IT staffing headcount was down by 9% on a quarter-on-quarter basis and revenue from the unit declined by 3% in the same period. This is from a company that claims to have become India’s largest IT staffing company in terms of headcount during the year.
Meanwhile, during the investor concall after presenting the financials for the quarter that ended September 30, Ravi Vishwanath, Quess group’s CFO, said: “Despite putting the pandemic behind us and powering on, global uncertainties continue to provide some challenges in the business environment, which is evident largely through a slowdown in IT hiring that has impacted our IT Staffing and Selection businesses.”
Quess Group CEO Guruprasad Srinivasan, added: “Our IT staffing business saw a headcount decline of about 300 during the quarter. The slowdown in IT hiring has increased the cost pressure on our clients while the cost of acquiring a candidate has not gone down. In addition, this is the first time we have witnessed a delay in associate onboarding with the client. This has created a bench of around 100+ associates.”
Although IT staffing is a relatively small chunk of business for these two companies and is unlikely to affect fortunes significantly, it shows how IT firms may be responding to anticipated recession in the developed market leading to tight demand for services in the near term.
How the rest of the economy, especially the banking and financial services sector and retail revs up in 2023 will decide how things shape up for the top staffing solutions companies in the country.