Attrition rate in BPO is 7.8% points higher than other industries in India

Attrition rates in India's business process outsourcing (BPO) industry are about 7.8 percentage points higher than in other industries, according to a report released by Hay Group, a global management consulting firm.

The finding comes from a new report, BPO Special Sector Survey 2008, based on Hay Group's global online compensation and benefits database, PayNet. It showed that in general, staff turnover in India is 15.7 per cent, but at BPO companies, attrition is the country's highest at 23.5 per cent, followed by Communications (22%) and Retail (18%).

The report explained that one of the factors is that the remuneration structure design is not as attractive when compared to other industries in India.

"The BPO industry hires a large number of graduates who are bright and ambitious. From our analysis, the overall compensation structure design is not competitive when compared to general market practices. This means that BPO employees do not receive as much cash-in-hand as their peers in other industries. When you add unattractive remuneration to working shifts, lack of career development, and monotonous tasks, it is not surprising that employees leave when offered a small salary increase," states Oscar De Mello, Country Head of Hay Group's Reward Information Services in India.

The BPO industry is a critical sector in the Indian economy, worth $11 billion and employing over 2 million people. However, if the industry is to achieve the projected $30 billion by 2012, it will have to tackle this talent attrition issue now, notes the report.

Contrary to belief, adjusting pay need not automatically lead to higher operating costs for BPO companies. By creatively designing their total reward package towards more short-term incentives and benefits, and linking the package to performance, companies can ensure that they get higher productivity without hefty increases in salary costs and minimize attrition costs and issues at the same time," De Mello added.