Every three months, Prime Minister Manmohan Singh meets with a special panel assigned the ambitious task of figuring out how to produce 500 million skilled workers over the next two decades.
The panel is a cross section of the country?s power elite, including many of the usual figures like the education minister, the finance minister and the former chief executive of the country?s biggest software outsourcing company. Then there is a more curious choice: Manish Sabharwal.
Sabharwal runs TeamLease, a Bangalore-based agency that has created thousands of jobs by fielding temporary workers for companies in India that want to expand their workforce while skirting the country?s stringent labour laws, which businesses say discourage the hiring of permanent employees. Many labour leaders and left-leaning politicians accuse him of running the nation?s largest illegal business.
He does not completely disagree. ?We should not exist,? Sabharwal, a 40-year-old graduate of the Wharton School of the University of Pennsylvania, said about his company, which has 60,000 employees. ?The genius of India is to allow us to exist.?
What Sabharwal calls ?genius? others would call dysfunction, or at the very least, an elaborate workaround, or temporary fix.
India is known the world over as a prime innovator of outsourcing for foreign companies, which take advantage of its cheap, English-speaking labour force. Less well known is the extent to which Indian companies outsource their own jobs within their own country.
Walk into any of India?s shining new shopping malls that sell expensive brands, like Gucci and Satya Paul, and many of the store clerks, janitors and security guards will be on the payrolls of outsourcing companies, not those of the owners of the mall or stores in it, executives say.
The practice highlights a fundamental tension between India?s socialist past and a new, freewheeling private sector that is increasingly powering the economy while chafing at what many companies say are laws so protective of workers that they blunt hiring and stifle growth.
Sabharwal provides a backdoor way around the old system in a manner that is not without controversy. He fills thousands of jobs at a cost that allows many companies to continue to function, and even helps retrain India?s large population of young job seekers ? half of Indians are 25 or younger ? who are undereducated and ill prepared to enter the labour force.
In that highly competitive environment for jobs, Sabharwal supplies workers who are paid as little as half of what permanent employees earn and who usually receive few benefits. Though technically temporary, many of them keep their status at the same companies for years. In India?s nascent industrial hubs near New Delhi, autoworkers are increasingly protesting the use and treatment of the kind of contract workers Sabharwal supplies, who lack job security.
But the reason Sabharwal has thrived, he and others say, is because India needs him. The nation?s complex web of federal and state labour laws intended to protect permanent workers are so onerous that few employers want to hire them, they say.
Those laws cover virtually every aspect of employment ? how workers are hired, what they are paid, how many hours they can work and whether they can be fired. Factories employing 100 or more workers are not allowed to lay off employees without the government?s permission.
The laws are unevenly enforced, but many businesses still consider them so cumbersome that they find it worthwhile to have somebody else manage the ?compliance issues?, which is why TeamLease also employs about 60 people in its regulatory division who do so.
?India, compared to even European countries, has more restrictive labour laws,? said Sean Dougherty, a senior adviser at the Organisation for Economic Cooperation and Development who has studied India?s labour market.
Sabharwal has provided a way around what many see as those daunting obstacles to growth, at least for now. But even he argues that his workaround business model is not sufficient for India to bolster manufacturing ? still just 16% of the economy ? and to create new jobs for the 12 million people who enter the labour force every year.
He is among the first to acknowledge that many workers suffer because the workaround model does not itself create enough good jobs. But it is offering an opportunity for growth where the old model does not.
?For business, labour laws are a thorn in the side, not a dagger in the heart,? Sabharwal said. ?People who are hurt the most are people who need to get off farms, labour market outsiders, people from small towns, the less educated, the less skilled.?
TeamLease is not the business Sabharwal set out to open. During the 1970s, when he and his family spent four years in Washington, a question kept nagging him: ?Americans weren?t really smarter than us, but why were they richer than us??
It was a timely question because India?s economy then was turning increasingly socialist and state-directed. Policymakers nationalised large banks, raised the highest tax rate to 97.5% and required factories with 300 or more workers to get government permission before layoffs, a threshold later reduced.
Sabharwal?s family of civil servants and teachers believed in India?s socialist policies. His father, who worked for a time at the Indian Embassy in Washington, was a solid member of the establishment.
?We had arguments about government versus private sector, growth versus facilities in the government,? his father, Mahendra, said.
The younger Sabharwal defended the private sector, which he argued was more effective than the government and the reason for America?s greater riches. He became convinced he could have a bigger impact on India as an entrepreneur than by joining the civil service as his father had done.
He wanted to start a business. But first, he said, he had to learn how a free-market economy worked. So, with his grandparents paying the tuition bill, he went to the Wharton School. ?I wanted to go out and understand how business was done without regulatory connections,? he said.
At Wharton, professors and friends say, he worked with single-minded focus on a business plan ? not for TeamLease, but for a private insurance company, India Life, which he hoped would take on the state monopoly. But back in India, policymakers were not yet willing to introduce competition in the insurance industry. He hit a brick wall.
Then one day an Indian manager at Siemens, the German company, complained to him about the tedium of processing payroll and benefits paperwork. Sabharwal decided to turn India Life into an outsourcing company to do that work.
In 2001, Hewitt, an American company, acquired India Life. A year later, Sabharwal and his partner, Ashok Reddy, started TeamLease to solve another frequent problem clients complained about: Hiring and managing employees in the thicket of India?s complex labour laws.
Today, one of TeamLease?s biggest clients is Whirlpool, the American appliance maker. In 1997, a few years after Whirlpool arrived in India, it hired hundreds of salesmen and sent them to independent retail stores to sell washing machines, refrigerators and air-conditioners to middle-class Indians who had never bought such appliances before. But soon executives were overwhelmed trying to keep abreast of changes in labour laws and various minimum-wage rules in India?s 28 states.
So, Whirlpool began outsourcing its sales staff, which has since grown to 1,850 people ? first to a staffing agency called Adecco and later to TeamLease. Excluding 250 people who work at the company?s own stores, most of its sales workers are employed by TeamLease, which handles their wages, commissions, healthcare and retirement savings.
Indian executives at Whirlpool, which sells appliances in 130 countries, said India was perhaps one of only a few places where an outside company managed its sales staff. ?Having a guy on your payroll comes with a lot of responsibility,? said Hardesh Chojher, general manager of marketing at Whirlpool in India. ?For example, each state has its minimum wage, which is revised every three months.?
Many employers in India rely on contract hiring agencies like TeamLease. Indeed, foreign companies that come to India often hire law firms and staffing agencies before hiring anyone else.
Nearly a quarter of India?s industrial labourers worked on contracts in 2007, up from just 16% in 2000, according to government data, and going by what happened at Maruti Suzuki?s Manesar plant not everyone seems happy. Frustrations boiled over in early October when 2,000 workers went on strike. The spark for the strike was that the company had not immediately taken back 1,200 contract workers who supported 1,000 regular employees during a previous dispute, underscoring the vulnerability of the temporary hires.
?Everyone aspires to become a permanent employee,? Rajbir, a 23-year-old contract worker said while he camped with other striking workers outside the factory gates. He said he worked on a contract basis because he needed the money and had few other options. ?Wherever we go, there will be similar problems,? he said.
The chairman of Maruti Suzuki, RC Bhargava, disputed the workers? allegations, but he acknowledged that Indian companies hired too many contract workers. He said policymakers should give companies more flexibility in laying off workers and, in exchange, force them to offer workers generous unemployment insurance. ?This conflict situation doesn?t help anybody,? Bhargava said.
In October, the Indian government proposed letting ailing factories lay off workers if they offered unemployment insurance. But the provision would apply only to companies in a few new manufacturing zones. Analysts say policymakers are unlikely to consider broader reforms in the next few years as there is a deadlock between advocates for change like Prime Minister Singh and lawmakers who believe that any weakening of laws would hurt workers.
Meanwhile, many economists assert India?s labour laws will continue to restrict the country?s job growth, at least in the formal sector. While that?s bad news for India, it?s a circumstance that continues to allow Sabharwal?s business to thrive. Last year it grew by 10,000 employees. It had $160 million in revenue last year and is growing at about 20% a year, executives said. Sabharwal said his
business could grow even faster if the government changed the labour laws because that would create more jobs and increase demand for job training. But then, he is not letting government inaction hold him back. NYT