Auto manufacturers let go of contractual workers as slowdown bites
In July last year, as auto companies recorded their worst sale in 20 years, 35-year Sumit Lal, who worked as a fitter with one of India’s leading two-wheeler firms, was asked to proceed on “temporary leave” by his employer. One year has passed and Sumit’s wait to return to Manesar – the country’s largest automobile hub – continues. He now works as a daily wager despite having a degree from ITI, Begusarai.
Availability of jobs at India’s auto companies has shrunk significantly over the last two years, as the industry goes through one of its worst slowdowns.
An analysis of employee data at top auto firms shows that hiring of contractual workers – which constitutes more than 60 per cent of the total workforce – fell by around 24 per cent in 2019-20, as compared to two years ago in 2017-18.
Most of the companies said that the slowdown has forced them to reduce the number of temporary workers due to the reduction in production hours.
Temporary workers and student trainees are primarily hired from Industrial Training Institutes or under the government’s National Employability Enhancement Scheme, for a cycle of 7 to 8 months. Their contracts are renewed according to requirement. Then, there are outsourced staff, hired through staffing firms, who are primarily engaged in non-core areas such as loading and unloading of raw material, security and canteens.
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Auto sector is one of the largest job drivers in India and on an average employs 8 per cent of the total workers in all industries.
Take for instance the country’s largest car producer Maruti Suzuki. As of March 2020, the Delhi-headquartered company hired 17,337 temporary workers, including student trainees, 11.4 per cent less compared to March 2018.
The company said that there has been a contraction in demand in 2019-20 due to multiple challenges such which was closely followed by the Covid-19 pandemic. “The passenger vehicle sales in 2019-20 fell 18 per cent as compared to the previous year. Manpower deployment for production changes according to volumes. The company hires and trains temporary workers for a fixed period to meet these business exigencies,” a company spokesperson said. He added that despite production coming to a halt during the lockdown, the company did not lay off any employee. “We have paid wages and allowances during the entire lockdown period,” he added.
Tata Motors, which has been trying to reduce its employee cost over the last few years, almost halved the number of temporary workers to 19,169 in FY20 as compared to 38,107 in FY18. “Hiring of a flexible workforce is directly related to the volume of production, which in turn is aligned to market demand. Such a worker is engaged for a specific period when there is a surge in activity,” a Tata Motors spokesperson said.
Similarly, Mahindra & Mahindra’s temporary workforce dropped by 7.9 percent in FY20 as compared to FY18. The company’s managing director, Pawan Goenka, had earlier said that the auto maker had to retrench about 1,500 temporary workers in 2019 due to the slowdown. “Temporary workforce may be rationalised when production isn’t at full capacity. As we ramp up production, we look to increase manpower requirement,” a company spokespersons aid.
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Executives of auto companies said that job generation is likely to stay muted as they don’t expect a revival in demand in the near future. This is despite a significant number of workers going back to their villages due to the low demand. Moreover, factories functioning at 60 per cent capacity don’t need to replace the workforce immediately.
“The idea of hiring temporary workers is to have the flexibility to rationalise according to production demand. Presently, factories are operating at not more than 60 per cent capacity due to which there is not much requirement of labour,” said RC Bhargava, chairman at Maruti Suzuki.
For the blue collar workforce, new hiring will have to wait for a while, says Rahul Mishra, principal at consulting firm Kearney.
“Companies are also scaling down operations given the luke-warm market response for their segments and therefore this is likely to be surplus labour availability for manufacturers and their suppliers,” he said.
