Memorandum to Govt.
With Regard To Budget 2005
ERA - The Executive Recruiters Association ( www.era.org.in ) is a non-profit Chamber of Commerce representing Search, Selection and Staffing Recruitment Consulting firms operating in India. Executive Recruitment is a specialized profession that helps client organizations identify, evaluate and recruit executives at various levels. Most of the major firms in Selection & Staffing Recruitment in India are members of ERA.
ERA strongly urges the Government to favorably consider the following points:
- India should take the lead in introducing the “GATS Visa” , which will facilitate cross-country movement of professionals.
- The Government should expeditiously incorporate the promised Manpower Export Promotion Council, with adequate representation to the Industry bodies like ERA.
- The SEBI Committee on Corporate Governance has made a mandatory recommendation about appointment of Independent Directors. It states “The non-executive directors help bring an independent judgment to bear on board's deliberations especially on issues of strategy, performance, management of conflicts and standards of conduct. The Committee therefore lays emphasis on the caliber of the non-executive directors, especially of the independent directors.” To ensure genuine transparency, protection of shareholder interests and to help listed companies locate professionally acclaimed independent directors for their board, the use of a Professional Executive Recruitment Consultancy organization following the ERA code of Ethics & professional practices should be made mandatory for the selection of Independent Directors.
- The professional recruitment organisations have immensely contributed to the industrial development in all the sectors including earning valuable foreign exchange. The Recruitment industry helps to generate among the highest net invisible FOREX inflow on a continuing sustainable basis. The recruitment industry must be treated on par with the software & IT Enabled services, since in each of the above case, export earnings are being created through deployment of knowledge workers. Export earnings for the recruitment industry must also be covered under 80HHE of Income Tax Act.
- The labor laws for contract employment need to be liberalized to enable increased employment. The largest private employer in US is a Temporary Employment company, employing around 2 million temporary workers. India 's unemployment can be reduced by allowing liberalized contract / temporary employment for knowledge workers.
- Today, the rate of temp job creations is significantly hampered primarily due to staffing companies not being considered as the Principal employer. This not only increases the growth of unorganised sector, but also leads to increase in Sham consulting agreements in this industry. To avoid these, it is critical for the Staffing Companies to be recognized as Principal Employer under Section 2g, 7 of CLRA.
- Yet another key issue that is impeding the temp staffing industry growth is the restriction imposed on utilizing temp staff for Core and Perennial work. Since the definition of Core and Perennial work is not clearly stated, it is bound to get interpreted differently by different entities (appropriate governments) . As stated in the previous point, this is hampering the employment creation significantly. The restriction (Sec 10 of CLRA) should be removed, thereby allowing utilization of temporary staffing in all functions and industries.
- In today's scenario, we are operating with a highly fragmented market with decentralized processes. Due to over-regulation and under-supervision in our industry, the overall compliance level is significantly low. This adds to the lack of transparency and encourages high degree of corruption. In order to evade this situation, a single-window National License for staffing companies should be created replacing the existing contract-by-contract registration (Sec 7,12 of CLRA). This would significantly shift compliance responsibility directly to the staffing company.
- As per the current rule, EPF is to be deducted for employees from day one, irrespective of their employment tenure. This does not help either the employees or the employers especially in the case of staff working for a short period. We would like to request the Government to consider deducting EPF only in case of employees working for more than 90 days.
- The seeds for the growth of Software Exports were provided by "onsite body-shopping", which helped customers recognize strengths of the Indian software professional. Recruitment Companies have contributed significantly to it. ERA will help build the Global Brand & Recognition for Indian knowledge workers from other professions - Engineers, Accountants, Medical, Marketing, Human Resources, Media, etc. ERA can be the catalyst to replicate the software exports success to other professions for outsourced knowledge & R&D centers, helping create employment, significant exports and FOREX earnings.
- The Recruiting Industry should be exempt from Service Tax, since it is contributing working towards the government top priority of creating employment & reducing unemployment of the educated youth. Your avowed policy is to give the much-needed fillip to employment generation. Does this tax not go against the avowed objectives?
- To achieve the Government's own objectives of significantly enhancing employment in the country, it is also important that Service Tax for Interim staff be done away with completely. If Service Tax has to be charged the government needs to issue a clarification that the tax is on the service charges and not on the entire amount, which includes the compensation paid to the Employee. This clarification is essential to avoid any ambiguity and litigation, since any other interpretation would be suicidal to the survival of the nascent staffing industry.
- The productivity of the national employment service could be significantly improved through Private – Public partnership . The private sector with its expertise and experience, could help the public sector in planning, structuring and implementing the employment service effectively and this in turn we believe would radically help improving productivity.
- Today, Employers with less than 25 employees need not declare the employee status. Because of this, India today has over 93% of the labour force working under the unorganised sector. By making declaration mandatory for the organisations of all sizes , the Government would get a wider and clearer picture of the organised sector. This would immensely help the Govt. in making key decisions pertaining to Labour Force.
S. Bhatia, ERA Chairman - Tel : 022 – 2285 0640 email:
Satish Doshi, Founder Chairman ERA - Tel : 022 - 28206000 / 28202200 email:
K. Pandiarajan – Immediate Past Chairman – Tel : 2833 3351 / 52 / 53 email :
B.R.Muralidharan - Executive Director - ERA ; Tel : 022 - 56733686; e-mail :