India – Despite being employed in a lucrative industry worth S$16 billion in India, business process outsourcing (BPO) employees are no longer keen on staying for the long haul unless their base salary packages improve.

BPO companies have the highest attrition rates – 23.5% among all sectors in India – and the poor remuneration structure design currently prevalent in the BPO industry is one huge factor. According to the BPO Special Sector Survey 2008 released yesterday by Hay Group, communications (22%) and retail (18%) sectors have the next highest attrition levels after BPO, and average staff turnover in India is in fact 15.7%.

Even though a large number of BPO hires are bright and ambitious graduates who might initially work for less money, attrition rates will continue to rise if the overall compensation structure design remains uncompetitive compared to other industries. Oscar De Mello, country head of Hay Group’s Reward Information Services in India, explains, “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.”

BPO staff’s short-term incentives account for only 4% of the total remuneration, compared to other industries, where short-term incentives are usually 10%. Benefits are equally limited with only the pension fund and gratuity, which cannot be used during the employment period, on offer. A high portion of the remuneration is also allocated to housing allowances, which further decreases the base salary an employee takes home.

For the industry to achieve the projected S$43 billion by 2012, De Mello asserts the talent attrition issue has to be tackled now and a higher pay structure would not break BPO companies contrary to belief. De Mello suggests for companies to design their total reward packages towards more short-term incentives and benefits. “By linking the package to performance, companies can ensure that they get higher productivity without hefty increases in salary costs and minimise attrition costs and issues at the same time.”

Other recommendations from the report include effective communication of the compensation plan to promote employee buy-in, promotion of team-based culture, transparent performance management systems and providing local or international mobility opportunities.