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Many global players have entered the Indian market over the last decade and some are poised to make the quantum leap. This market is rapidly moving from a highly fragmented and unorganized sector to a structured and organized industry. The Indian HR solutions industry has grown significantly. This is largely attributed to the change in the mindset of large Indian companies in two ways:
Given this transformation in customer segments, the industry is emerging as more than just a vendor in clients’ growth plans. The present HR marketplace in India has some individual freelancers, startups, small and medium players, as well as large Indian companies and MNCs. The size of this space is expected to be more than INR228 billion and has grown at a CAGR of 21% in last 5 years.
The industry can be broadly divided into permanent recruitment with a market size of INR23–25 billion, temporary recruitment with a market size of INR 167-170 billion and other segments with a market size of INR 33-38 bn The strong growth witnessed by the sector has brought a combination of opportunities as well as challenges. Permanent recruitment has grown on the back of growth in key customer industries, with large MNCs entering the Indian market and expanding their presence, as well as the emergence of new industries. However, permanent recruitment companies face challenges in the form of high attrition and competition from online portals.
Temporary recruitment companies are growing with organizations that are gradually increasing their share of temporary staff in their total workforce to withstand the economic downturn — recognizing the merits of having temporary staff. However, such companies face high attrition rates with clients absorbing temporary staff, pressure on their working capital and compliance with laws applicable to permanent staff.
HR solutions is a highly competitive and fragmented industry that is poised for enormous growth in the next 10 years as companies increase their investment in their HR infrastructure.
Furthermore, changing market dynamics and global competitive pressures has resulted in businessbecoming more complex, making companies realize the importance of having the right employees undertaking complex tasks and outsourcing non-core activities. Those that were earlier reluctant to engage external vendors now consider HR consultants to be their partners in their organizations’ growth strategy.
Temporary and permanent recruitment are estimated to contribute 86%1 to the overall market size. Temporary recruitment (staffing) has the largest share at 73%1 of the market, since it includes pass through salary costs.Permanent recruitment has a 13%1 share and only includes the net fees from each successful referral.
The HR solutions industry is highly competitive and is poised for enormous growth in the next 10 years as companies increase their investment in their HR infrastructure.Changing market dynamics and global competitive pressures has resulted in business becoming more complex. This has made companies realize the importance of getting the right candidates to undertake complex tasks and outsourcing non-core activities. Companies that were earlier reluctant to engage external vendors now consider HR consultants their partners in achieving their organizational growth strategy.
The search market, which evolved in the late 2000s, is expected to continue growing on the back of the expansion and entry plans of large domestic and international companies into new sectors and geographies.
Recruitment is expected to evolve from a fragmented ecosystem to players adopting ways to work closely with clients’ requirements, where “resume pushers” (who do not add significant value to their clients) will eventually get marginalized. Recruitment companies are likely to move away from sourcing relevant candidates to accessing the right ones by using psychometric and other robust tests to shortlist them.
Temporary staffing, one of the leading HR trends today, is expected to increase its penetration significantly, given the current uncertain economic conditions. Companies and captive units are likely to increasingly depend on agencies to lease them with the required manpower in time, to meet sudden demand from clients.
Organizations are fast realizing the benefits of outsourcing non-core activities and focusing on enhanced value added activities. Outsourcing non-core activities enables HR professionals to move away from routine administration to a more strategic role. As a result, the number of companies outsourcing HR activities is expected to continue to rise and the scope of outsourced HR activities to expand.