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Empowering Service Providers

Reduced Margins

“Even if one has to outsource the pay-roll management or run a personnel department for these staff, it would cost 8-10% of the margin of the service provider. Take a company that charges for doing effective pay-roll management, which includes hiring the worker, maintaining personnel records, making their salary, giving pay slips, distributing or transferring their salaries into their accounts, maintaining their leave records and going for audit inspections. To run this kind of back-end administrative office would cost 8-10% of the cost. Then in 10% how the companies are surviving?” questions Dr Bakshi.

There are specialised companies today in the market that provide administrative or personnel services like this and charge around र300 to र400 per employee record. In the case of service providers, it would cost nothing less than र500 per employee to maintain a personnel department itself. “Then the question arises how can the service providers do business when their costs and expenses are running parallel or overshooting in many cases? How can they imagine profitability out of this business when the payment cycle is more than 90 days? In this whole vicious cycle, either the service provider is losing money or the client company is not getting the due service and is losing money or the Government is losing money by not getting the due charges/benefits.

In short, everyone is losing money in this business. Dwelling into what the clients stand to lose, Dr Bakshi says, “They get a very bad deal. In the garb of cleaning, they are getting bad indoor air quality, high cross contamination, fast deteriorating surface quality and above all, a bad reputation or image of the client company itself. “The service provider, on the other hand, makes no profits. In order to make something out of this business the service provider would have to resort to unethical ways of doing business. No company with few thousand workers can claim they are able to do business with 8 or 10 or even 12% margins. There is a huge risk involved in doing business in such a manner.

“From the Government end, if one were to put on record the number of workers employed in the service industry and the amount of money that has to go to the government by way of ESI or PF, not even 10-15% of the money reaches the government coffers. In short, the Government is losing millions of rupees which are being collected in the name of benefits. The worker too stands to lose the money that is being deducted from his salary in the name of ESI and PF.”

The attitude towards service providers or cleaning itself by the client companies could be attributed to their not understanding what cleaning is all about, says Balram. “But, let’s take a typical example of company which has an executive housekeeper or facility head in place to interact with the service provider. Most understandably, the executive housekeeper understands the requirements of the service provider and forwards the request to the purchase department. It is here that hell goes lose. The purchase department argues that the earlier service provider did the same at much lower prices. He would probably go about bargaining for a lower price and probably bargain even lower from the next vendor.

The client company is cutting and chopping at what price? At such low prices, what will the vendor be left with? How do clients expect the service provider to function? This is why this industry is losing its dignity.”

Client Education

Ideally, every service provider proposes margins at which he can run the business with, says Vinay Deshmukh, CEO, Forbes Facility. If the client does not agree to the terms of the contract, the service provider has the choice of turning down the contract. Why take up such contracts at all? If a service provider is making a quote of र100 and is ready to reduce it to र90 in the bargain but the client refuses to pay anything above र80, then there is no need to take up the job at all.

Every other service provider is trumpeting about the client not paying. The industry as a whole will stand to benefit, if the service provider does not take up contracts that will not fetch him the money that is due to him. At the same time, the client needs to be educated about what a service contract is all about. Today, if the client is bargaining for lower margins is probably because he is ignorant. What does the client know about cleaning equipment or cleaning chemicals? Take for example a service provider gives a quotation to the client and lists the brand of equipment and chemicals that will be used for cleaning. He quotes र200 wherein the cost of a particular brand of machine is र100. Now another service provider gives a quotation of र80 for the same brand of machine which costs र50!

The direct reaction to this will be that the client opts for the second service provider who is quoting lower. The client can only see that the brand of the equipment is same but does he know that the same equipment comes in various capacities and various sizes and that the cost varies accordingly?

Does the client know what kind or size of equipment is required to service his premises? Obviously, no.

Now, take a simple hand wash solution. The service provider has two options – one, soap oil and two, a proper branded hand wash solution. While a soap wash will cost र50, a proper hand wash will be about र60 or र70

Does the client know the difference between soap oil and a branded soap solution? No, again. Hence, it is important that the client is educated.

Again, there are two types of clients, one who understands the difference and opts for a better soap solution and two, who feels that soap oil will suffice. But, the industry stands to gain.

Editors Note:

By the end of it all, what is important is the realisation by every organisation that clean and a hygienic environment is an integral part for its growth and productivity. By compromising on quality and delaying payments, the management is only unknowingly encouraging inferior cleaning standards. Most of the cleaning companies are small or medium sized with limited resources. The quality of their service delivery, their sustained performance and growth depend very much on the support they receive from the client companies. Very often the equipment are purchased by housekeeping companies on credit and a delayed payment puts the equipment supplier also in difficulties. Timely payment received from the client companies can help the service provider keep up commitment to the other sections of the cleaning industry and to his cleaning staff. We know very well what happens when even a couple of janitors choose to be absent. Cleaning and cleaners are important. Once the awareness gets embedded in the system, things can look up.

Minimum Wages In India, the client companies offer payment as per the Minimum Wages Act (MWA) which stipulates a salary that does not fetch two square meals a day. Interestingly, the minimum wages differ from State to State, from city to city and even from profession to profession! The average minimum wages, in short, is between र3000 and र5000. “How can anyone expect to run a family with just र3,500 or र4000 salary per month?” asks Balram J Menon, Director, Adroit Facilities Management Services Pvt Ltd. “Many of the janitors, who commute to their place of work from far away…

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