TeamLease now sees an average 30 per cent revision in minimum labour wages announced by the Karnataka government to erode profitability of pharma industry. The temporary staffing major is of the view that pharma sector will now need to optimize productivity of workforce.
 
In the draft notification on minimum wages for labour announced by the Karnataka Department of Labour in November 2015, there is a clear increase by 30 per cent in all categories spanning from highly skilled workers, skilled workers, semi-skilled workers, unskilled workers, drivers/cleaners and office staff covering administration and accounts.
 
While this increase is expected to create a dent in the total expenditure incurred as staff salaries for pharma companies in Karnataka, it will not lead to retrenchment and job loss or reluctance to hire people in a significant way. This is because Karnataka is recognized as an industry-friendly state, Sonal Arora, assistant vice president, TeamLease Services told Pharmabiz in a telecon.
 
“This 30 per cent is the highest increase in wages for factory labour and the industry will definitely face crisis in the short-term compared to the earlier 10 per cent,” she added.
 
Now the companies will definitely need to look at productivity increase from each of the workforce and also automate many of the processes to maximize employee efficiency, noted Arora.
 
Going forward, companies would be required to re-engineer their current business model using the same number of labour workforce to put in place performance management systems to offset the burden of labor costs. Now this could be a crucial transformation for companies to organize and manage human resources when taking decisions on promotion and training, among others, she said.
 
Moreover, the unscheduled power cuts and load shedding would leave the pharma company managements with no choice but to opt for working overtime. Now the increase in minimum wages will see drug manufacturing companies trying to manage production targets while simultaneously curtailing extra expenses to disburse overtime payments as per the norms, Arora stated.