MUMBAI, INDIA - INDIA'S outsourcing businesses are losing employees fast, according to a new report by the Hay Group, a global management consultancy.

Attrition rates in the lucrative business process outsourcing (BPO) industry are about 7.8 percentage points higher than those of other industries.

The report showed that, in general, staff turnover in India is 15.7 per cent, but at BPO companies, attrition stands at 23.5 per cent - the country's highest.

This is followed by the sectors of communications (22 per cent) and retail (18 per cent).

And the reason? Remuneration structures at BPO firms are not as attractive as those of other industries.

Short-term incentives, for example, account for only 4 per cent of total remuneration, compared to 10 per cent in other sectors in general.

Additionally, benefits offered by BPO companies are limited to those that can be enjoyed only after retirement, such as pension fund and gratuity, and not during the employment period.

The BPO industry hires a large number of graduates who are bright and ambitious. From our analysis, the overall compensation structure is not competitive when compared to general market practices, said Mr Oscar De Mello, country head of Hay Groups Reward Information Services in India.

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.

Valued at US$11 billion (S$15.6 billion) and employing over two million people, the BPO sector is a critical sector in the Indian economy.

If the industry is to achieve the projected US$30 billion by 2012, we have to tackle this talent- attrition issue now, said Mr De Mello.

What is needed is more creativity in designing the reward package towards more shortterm incentives and benefits, as well as linking the package to performance, he added.

This would ensure higher productivity without hefty increases in salary costs. At the same time, it minimises the issue and costs of high attrition.

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