Achieving high productivity at low costs is a top business priority. But cutting costs doesn’t necessarily have to mean cutting jobs. It just means taking a smarter approach to do what is being done every day without increasing costs. The same goes with cleaning too but sadly when it comes to making reduction in the overall expenses, there is a major cut made in cleaning jobs. Mohana M discusses the implications of reducing costs and cutting corners in the cleaning service business.
One of the major challenges in the cleaning service is to improve application performance and work with existing SLAs without adding too many new resources/costs. As the demand to address customer needs and meet SLAs increases while budgets shrink, the major blow is dealt upon the actual worker in the service chain. Cleaning contracts are mainly based either on a headcount basis or on the square feet area to be maintained.
Headcount Contract
In every other case of outsourcing, the cleaning contract is sealed on the number of workers deployed to clean a given area. In an industry where salaries are structured around “unattractive” minimum wages, absenteeism and job switching are common. “Consequently, even if a single worker does not turn up on a particular day, the client company complains of non-performance and lack of quality,” says Sandeep Palwankar, Director, Clean Sources, Mumbai. There is a total disregard to the present workers putting in extra hours to ensure that the area is cleaned as it is done during full strength. “Over and above, the worker does not get paid for the extra hours put in!”
At the end of the day, the client is always right. We have to work keeping this fact in mind.
– Sandeep Palwankar
While workers switching to better paying jobs may seem justifiable, the client refusing to pay anything above the minimum wages is not. “We are already facing a major crunch in labour supply, and a few years down the line clients will have to pay more to get their cleaning done,” says Sandeep. Contracts should be based on the work to be done and not on the number of workers. “If the contract is on square feet of area to be cleaned, the cleaning contractor can deploy man and machine accordingly. What takes three to four workers to clean an area can be done by much less manpower along with machines.”
In the headcount based contract, the number of workers is employed to service a particular area as agreed upon in the SLA. “However, there are many instances of workers being called to maintain an additional area without a corresponding increase in manpower or payments. This adds to the pressure on the cleaning contractor in meeting costs and quality. At our end, we sit across with the client and make amends in the contract in such cases.” But many clients are known to dismiss the additional work as a goodwill gesture of the cleaning contractor, who succumbs to pressure in order to retain the contract. It is impossible to meet costs under such circumstances.
Delayed payments from the client end are not only the cause for cleaning contractors losing workers but it also creates additional problems. “It is not always that the full payment is made to the contractor as per the SLA. There are deductions made. If a client pays after a lapse of three or four months and deducts payments for not cleaning a particular area in the first month, there is no way the contractor can ascertain or cross check. Over and above that, the contractor is so stressed due to delay that he is happy with whatever he receives.
“The irony in all this is that, even though the client makes delayed or less payment, after 15 to 20 days the same cleaning contractor will go back to the client asking for additional job.”
Area-based Contracts
In the past, many IT companies preferred contractors based on the area to be cleaned. “In many cases, where the contract has been signed on area-based terms, all does not work well always,” says C Srinivas, Chairman, Iris Services Corporate Housekeeping. The cleaning contractor is able to meet expenses and abide by statutory compliances as long as there are no changes made in the terms and work conditions. There are clients who insist on increasing workers on grounds of not meeting expected standards of cleaning. “Any demand made by the client, to increase workers without corresponding increase in payments puts pressure on the contractor. Few months down the line, the cleaning contractor finds it difficult to even pay workers their statutory benefits. In order to retain the client, the cleaning contractor eventually resorts to malpractices and cutting corners,” explains Srinivas.
One should refrain from taking up contracts that result in the violation of statutory compliances.
– C. Srinivas
As a practice, Iris Services refrains from area-based cleaning contracts. Another factor that leads to cutting corners is the SLAs. The service level agreement clearly states the payment terms within which the contractor has to meet the minimum wage requirement and statutory compliances. This would mean the contractor has to reduce margins to make payments. But, for how long can a vendor do that? In order to satisfy the client, the contractor reduces costs, without realizing at whose cost he is doing it.
Any company outsourcing a vendor would expect the latter to comply with the statutory requirements so that it can concentrate on the core activity of its business. But most of the companies today cut costs by asking the contractor to meet all costs including statutory compliances within the payments agreed upon. “If there is an increase made in the number of workers, most of our clients, including ICICI Bank, accordingly increase payments.”
Even though there are clauses included in the SLA, the cleaning contractor in order to remain in good books gives in to the pressure from the client company. “In a broader perspective, SLAs are made to the benefit of the client more than the vendor.
“Another method of cutting costs that is practiced commonly by clients is in reducing the number of workers on a given site against what has been agreed upon. In such cases, the pressure falls on the workers. Where four workers were engaged, three of them would be squeezed into performing the entire task of cleaning.”
Man-Machine based contract
A service tax of 12%, ESIS & PF of 13.61% and statutory payment of 12% + 1.75%, are some of the basic expenses borne by the client when engaging a service provider. “A lot of the burden comes on the c
ontractor when the client expects the vendor to bring down all these costs. In normal circumstances, this is very difficult,” says George William, Managing Director, Spenswell Property Management Pvt Ltd.
More than 60% of the cleaning depends on manpower. Hence, if costs are reduced, there is reduction in the payments to manpower.
– George William
“Thus, to meet expenses at reduced costs, mechanised cleaning is an ideal solution, which will reduce manpower costs, enable quality service and bring down costs in the longer run. We have suggested mechanised cleaning to some of our clients, as one worker can complete cleaning of 15,000sqft with machines against 3000sqft manually.”
Even man-machine based contract is not beyond risk as the expenses incurred by the cleaning contractor on buying machines are huge. “Investing over a lakh of rupees in a machine for a cleaning contract of one year is not feasible. In fact, the client should invest in the machine as at any given point of time, either the client or the vendor can terminate the contract. The client company has a larger infrastructure to keep the machines unlike the contractor.”
The clients have to realise that three to five years down the line there will be no workers available to do the cleaning job. The economy is fast developing and janitorial workers are not prepared to work at minimum wages.
More than 60% of the cleaning depends on manpower. Hence, if costs are reduced, there is reduction in the payments to manpower. Ultimately, the worker suffers. “Alternatively, as contractors, we have to think of effective cleaning using better chemicals, etc. Here again, some of the clients agree to invest in branded chemicals for better cleaning results. But there are many who want just cleaning (as they say ‘cleaning is cleaning, just do it and go’).
“We are servicing corporate, IT offices, small factories, R&D facilities and laboratories. In most places, we recommend the client to provide the cleaning material. We are doing about 75 sites with a workforce of 700 in Bangalore. There is a huge market in Bangalore and very few good contractors are available. We are looking at increasing base in Bangalore itself,” says William.
Hence, the challenges in outsourced contracts based either on headcount or on the square feet area to be cleaned, can come down with increased mechanisation which enables faster cleaning, reduces manpower requirement and encourages better paid skilled labour.