workforce: companies are pushing towards the formalization of the workforce

A growing number of companies in sectors such as fast-moving consumer goods (FMCG), consumer durables, healthcare and pharmaceuticals are pushing to formalize their workforces, according to a report based on on a study by the recruitment company TeamLease.

The report “Reinventing the business with the formalization of the workforce” highlights that 59% of companies in these sectors intend to formalize the informal part of their workforce. This cohort includes 37% of companies from FMCGs, 36% from FMCDs and 27% from the health and pharmaceutical sectors.

A large number of employers indicated that managing an informal workforce has become extremely difficult, with 45% saying the main challenge is managing wages, while 21% of employers see persistent gaps in skills in the workforce. About 15% of employers also cited frequent absenteeism as a challenge.

“Over 90% of our workforce is still informal. This is concerning not only from a macro perspective, but has also become an ongoing impediment for businesses,” said Balasubramanian A, Vice President and Business Leader – Consumer Goods and Healthcare, TeamLease Services. “Throughout the pandemic, organizations have faced a new set of challenges, most of which persist today. Consequently, companies have reinvented their business strategies and the formalization of the workforce is a key part of this journey. »

The survey was conducted among 230 employers in these sectors. “Intention to formalize” is defined as the proportion of employers (across and within sectors and cities) who are willing and able to formalize their workforce.

The study highlights that 31% of employers recognize that informal workers face many limitations due to the lack of social security. In contrast, 21% think wages are low and 25% cite lack of medical benefits and time off.

“In industries such as FMCG, FMCG, Healthcare and Pharmaceuticals, employers have started to take consistent steps towards formalization. 65% of companies believe that management of an informal workforce is difficult. As a result, the majority of companies, around 56%, are prioritizing formalization with third-party payroll,” Balasubramanian said. While 64% of companies have already initiated major steps , 67% plan to implement them within the year. “Now, with favorable measures taken to simplify labor laws under the new labor code, formalization will become a mandate rather than a choice”, he added.

Nearly half, or 43% of the employers surveyed, consider formalization to be a priority. Employers in large organizations (approximately 80% of large-cap companies surveyed) have already taken significant steps to build a formal workforce.

From a workplace perspective, 29% of employers expressed an intention to formalize the role of sales manager. Employers also want to formalize profiles like electrician, community health worker (9% each), marketing manager (7%) and supply chain manager (5%).

However, there are still 24% of employers who do not consider formalization an immediate priority. One of the main reasons for this is that many employers (46%) believe the process has complex legal requirements and is expensive. However, for India to create high impact jobs and in the process of putting India to work, formalization of the workforce has become the imperative need of the hour.

Michael A. Bynum