Friday, June 14, 2024

TeamLease Exposes Non-Compliance Woes Ailing Indian QSR Sector

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According to TeamLease Services Limited – India’s leading staffing firm – only 20% of the country’s 2.5 million Food Business Operators hold an FSSAI license. Over a fifth of the employers do not even pay minimum wages and nearly a fourth doesn’t grant any leaves apart from weekly off.

This level of non-compliance in the Indian Quick Service Restaurant (QSR) space is deeply concerning. The sorry state of affairs underlines the urgent need for the QSR sector to abide by regulatory compliances for employee well-being, in line with the regulator’s FSSAI compliance guidelines, says TeamLease.

“The extent of non-compliance within the Indian Quick Service Restaurant (QSR) sector is a matter of significant concern. Over one-fifth of employers fail to meet minimum wage standards, while nearly a quarter do not provide any leave entitlements beyond weekly offs,” Teamlease findings show.

These findings underscore the imperative for the QSR industry to adhere to regulatory requirements for the welfare of its employees, aligning with the guidelines set forth by regulatory bodies such as the Food Safety and Standards Authority of India (FSSAI).

With India’s food sector undergoing explosive growth, the country’s QSR sector is projected to reach a milestone of USD 38.71 billion by 2029, accompanied by rapid national expansion in the coming years. As QSR brands rapidly scale their operations to meet this rising demand, TeamLease Services has highlighted the concerning state of non-compliance in this rapidly expanding sector. “There is an immediate attention required from industry stakeholders since non-compliance can lead to legal penalties, reputational damage, and operational disruptions for businesses operating in the QSR sector.”

The staffing firm notes that FSSAI is actively addressing food safety issues by educating players in the food services domain about regulatory compliance. It has made it mandatory for restaurants to prominently display food safety boards that list the dos and don’ts regarding hygiene, sanitation, good manufacturing practices (GMP), and other relevant guidelines.

Additionally, restaurants are required to employ trained food safety supervisors on their premises. “FSSAI is also expediting the registration process of Food Business Operators (FBOs) to ensure strong compliance with its guidelines. Currently, out of the 2.5 million FBOs in the country, only 0.5 million (20%) have an FSSAI license,” reported TeamLease.

From the perspective of managing the workforce effectively in this fast-paced food service industry, TeamLease has suggested that companies in the QSR sector must prioritize compliance to ensure the well-being of their employees, maintain customer trust, and sustain long-term success in the industry.

According to TeamLease, “The QSR sector is experiencing high attrition rates with a monthly average of 10-40% employee turnover. Around 75% of the workforce has a tenure less than 3 years, with 36% serving for just 1 to 2 years. One of the reasons behind the high attrition rate is the subpar compensation levels and practices as well. The average salary of 88% of the workforce varies between INR 15,000-20,000. It is even more concerning that 12% earns less than INR 15,000 which is less than the minimum wage threshold for many states in India. Additionally, around 64% of the QSR workforce does not receive any incentives.”

Teamlease has trotted out other working condition deficiencies for employees in the QSR sector. These include:

  • 21% of QSRs are non-compliant in terms of statutory benefits as they fail to meet minimum wage requirements.
  • 30% of QSRs neglect to provide statutory bonuses. In the absence of bonuses and incentives, employees struggle to find the drive to perform at their best. It impacts overall operational efficiency and customer service quality.
  • 23% of QSRs are not compliant with the Employee’s State Insurance Corporation (ESIC) provision that ensures medical care for employees earning less than Rs.21000. This oversight compromises employee well-being and reflects a disregard for regulatory obligations.
  • Gratuity benefits are also a matter of concern. While 58% of the QSR chains extend gratuity benefits to employees with 5-year tenures, the proportion of eligible employees is significantly low due to high attrition rates.
  • 24% of the surveyed QSRs do not provide any leaves beyond standard weekly offs, potentially contributing to employee burnout and dissatisfaction.

Kartik Narayan, CEO, Staffing, TeamLease Services Limited, said, “As a leading staffing partner, we have witnessed firsthand the impact of non-compliance on both the workforce and business operations. Nearly 75% of QSR employees have tenures less than 3 years, with over a third lasting just 1-2 years. This is further fueled by issues like subpar pay, lack of incentives, and failure to provide statutory benefits. These findings are indeed a wake-up call for the QSR industry.”

He added that an unmotivated workforce leads to high turnover rates, operational disruption and compromised customer service, thereby affecting the overall profitability. “Therefore, the QSR sector must prioritize fair labor practices, competitive compensation, and robust compliance measures. Addressing these workforce challenges is not just an ethical imperative but a strategic business necessity for the industry’s long-term sustainability and success.”

Balasubramanian A, Vice President & Business Head, TeamLease Services Limited, said, “While the QSR industry is undergoing rapid growth, there is a need to uphold compliance standards. There are alarming gaps like failing to provide minimum wage and neglecting statutory bonuses. Also, nearly 24% of QSR businesses do not provide any leaves beyond standard weekly offs, 4 in a month. Only a few of them prioritize employee satisfaction by allowing leave carry-forwards and accommodating extended leaves for personal reasons. This oversight erodes employee morale, and undermines customer trust. These practices largely explain why the average age of employees in the QSR space is in the low 20s. They see this as a first step but definitely not even as a near term let alone a long term career option.”

Rounding off its assessment of the QSR sector, TeamLease noted that effectively managing workforce policies on salary, incentives, statutory benefits, and leave entitlements is crucial for sustainable growth. “Industry leaders, policymakers, and regulators must collaborate to implement robust compliance measures, fostering an environment that promotes fair labor practices and employee welfare. By upholding ethical standards and creating a positive work environment, QSR businesses can cultivate a motivated workforce and ensure long-term success.”

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