Industry seeks aid for outsourced services sector

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SME Times News Bureau | 13 Apr, 2020
The FICCI Committee on Private Security Industry has sought relief measures such as wage subsidy and GST relief from the Centre for the outsourced services sector which includes private security and facility management.

In a letter to Finance Minister Nirmala Sitharaman, Rituraj Sinha, Chair, FICCI Committee on Private Security Industry said that the sector, which employs around 1 crore individuals, would be at risk if the customers in the sector reduce service volume or delay payments.

"Our business model is such that out of Rs 100 invoice raised, Rs 90 is payable as employee wages and statutory contributions. Rs 5-7 goes to overheads, to operate our branch offices and back offices to support payroll and other general administration activities for frontline workers. Rs 3-5 is EBITDA. Therefore, Net Profit/PAT level for entire sector ranges between 1-2 per cent," said the letter.

Sinha said that the customers of the every sector, from auto to hotels to telecom to resident welfare associations, who are in financial distress as a result of the pandemic and lockdown and have planned aggressive cost cut measures and outsourced services costs are the first to suffer.

He said that customers are already advising them about 3-4 months delay in payments, expect them to waive the 5-8 per cent service charges that sustain them and have also advised on reducing staff strength or service volumes.

Industry is estimating a 25-50 per cent decline in revenues in next coming months, said Sinha, who is also the Group Managing Director of Security and Intelligence Services.

"These circumstances will mean direct job losses for lakhs of security guards, cleaners, ATM technicians and other similar workers. A sector with such low margins and high working capital intensity is too frail to support wages of 1 crore workers if our customers reduce service volume, cut service charges and delay payments."

The FICCI panel has suggested wage subsidy for large employers on lines of other major economies.

"We request that private security, cleaning, housekeeping, facility management, cash logistics, manpower supply, pest control companies which have more than 1,000 employees on their payroll be provided relief by way of subsiding our wage costs," the letter said.

Sinha sought that 35 per cent of the minimum wages for at least 50 per cent of their workforce be subsidised for next three months and for 25 per cent of the workforce for six months. This will be critical to supporting our members in maintain current employment levels, he added.

Seeking relief on the GST front, he said the government should allow manpower supply and private security sector to deposit GST only after collection is received from end user, not on basis of invoice raising.

"We expect a 3-4 months collection delay. We do not have resources to ensure GST compliance as per norms under prevailing circumstances," he said.

Further, Sinha said that the sector should be classified as priority sector and banks should be advised to extend at least six months equivalent working capital credit lines to eligible security, facility management, manpower supply and cash logistics companies.

The industry body's committee has also asked the Sitharaman for extension of the Rs 50 lakh 'COVID-19 health cover' for security guards, cleaners, ATM and cash van crew along with other essential services workers who continue serve at risk of life during lockdown.

It also sought permission for CSR funds to be used for PPE expenses for essential services companies.

Sinha also asked the Finance Minister to extend existing provident fund assistance scheme for employers with less than 100 employees to all companies and employers in the sector.

"Government should support by contributing employer and employees share of PF contribution for next 6 months till situation eases," he said.