Will global companies offshore cheap labour amidst a slowing economy?

With uncertainty around  economic conditions mounting with each passing day and markets slowing down, globally, companies are experiencing a dip in revenues. Naturally, this causes them to take certain corrective cost-cutting measures to stay afloat. These measures may include mass layoffs and salary reductions.

In such situations, one strategy that some companies turn to is offshoring or hiring talent from countries where labour costs are less.

Offshoring has become a popular way for companies to reduce costs related to staffing, as it allows them to take advantage of the lower wages and benefits in other countries. This can be particularly attractive for companies in developed countries, where labour costs tend to be higher.

“Global companies have already started offshoring. Whether they’ll succeed or not, only time will tell.”

Unmesh Rai, vice president – HR, Piramal Enterprises

According to Unmesh Rai, vice president – HR, Piramal Enterprises, “Global companies have already started offshoring. Whether they’ll succeed or not, only time will tell. Many startups are looking at sourcing talent from countries where labour or workforce comes less expensive.”

Some of the innumerable benefits that global companies can reap from offshoring include the following:

Competitiveness

By hiring employees from countries with lower wages and benefits, global companies can significantly reduce their labour costs. This can help them remain competitive amidst a slowing economy.

Access to larger talent pool

Offshoring can also give global companies access to a larger pool of skilled and educated workers, particularly in fields such as technology and engineering.

Cultural diversity

Offshoring can bring cultural diversity to companies, which can lead to new perspectives and ideas that can help them grow.

Improved efficiency

By taking advantage of time-zone differences, efficiency can be improved. This is because, employees work around the clock on different projects.

Access to new markets 

Offshoring can also give companies access to new markets, as they can more easily tap into the local knowledge and customer base of the country where they are hiring employees.

“Global companies shouldn’t exploit this much-sought-after talent, using the ‘hire and fire’ technique, for short-term gains.”

A Thiru, a C-suite HR professional

A Thiru, a C-suite HR professional and former group president-HR, Cadila Pharmaceuticals, suggests, “When markets are slowing down, instead of viewing people as just resources and replacing them with cheaper offshore resources, if companies explore newer ways of exploiting the potential of their employees, they can overcome the negative impacts of slowing down and accelerate the progress of their businesses in the right direction.”

Asian labour markets, particularly those in countries such as India and China, have the potential to become a talent pool for global companies as the economy slows down. This is due to a number of factors, including lower labour costs, a skilled workforce, proficiency in English and government support.

Most importantly, Rai points out, “Global companies require an English-speaking workforce, and a large part of Asia is an English-speaking unit. Therefore, it becomes a natural extension for them”.

“Tech companies and other service-sector companies are focusing more on expanding and growing their businesses rather than solely considering the cost factor while acquiring talent”.

Jayant Kumar, CHRO for ACC and Ambuja Cement

The quality of the education system, the availability of infrastructure, and the ease of doing business also play an essential role in the decision-making process of global firms. With the Asian labour market scoring well in these areas, it can be a potential talent pool for these firms as the economy slows down.

While Thiru admits that it is natural for the Asian labour market, especially the Indian market, to become the ‘go-to’ talent source, he also advises, “Global companies shouldn’t exploit this much-sought-after talent, using the ‘hire and fire’ technique, for short-term gains. Instead, they should see it as an investment for accelerating their future readiness”.

Jayant Kumar, CHRO for ACC and Ambuja Cement, observes, “Tech companies and other service-sector companies are focusing more on expanding and growing their businesses rather than solely considering the cost factor while acquiring talent”.

This shift has already begun, and is likely to continue in the future. However, the movement of a global workforce, regardless of nationality or region, is driven by a variety of factors, not just cost.

Kumar adds that there will be a rise in hiring cheap labour in certain areas. “The expertise required for certain industries, such as oil and natural gas, can often be found only in a truly global talent pool, regardless of the individual’s location or nationality. In these sectors, the global demand for such expertise will drive growth in all markets, including the Asian market.”