India’s labour force consists of more than 40 Crore people working in the informal sector, contributing to more than half of the Indian GDP. However, the sector is often tilted less in favour of the workers and marred with problems such as unfair wages, exploitation of workers, and non-compliant employers.
Bengaluru based Smartstaff aims to solve such problems through its tech-enabled staffing solutions that try to bring more transparency and formalise the informal workforce.
(From left)Gnanesh Chilukuri, Arpit Dave, and Aravind Reddy | Photo Credit: SPECIAL ARRANGEMENT
The genesis
Arpit Dave, Gnanesh Chilukuri and Aravind Reddy founded Smartstaff in 2021. Dave and Chilukuri were co-founders of food delivery logistics start-up Runnr which was acquired by Zomato in 2017. After spending more than a year building Zomato’s logistical platform the duo felt it was time for their next venture.
Their prior experience with Runnr had given them an idea about how smartphones could make the work of food delivery partners more efficient. With wider penetration of smartphones and the internet, they started wondering if the same would be applicable for the larger blue-collar workforce.
“The thesis was that as more and more blue-collar workers get access to smartphone, one of the very first thing that would change is the way they work; that they would get visibility of how much they are earning, their financials, benefits and so on smartphones in the coming years,” says Dave.
In 2021, the company started off with a software solution similar to HRMS and built it for a few months. But soon, they realised that offering a lightweight software layer alone wouldn’t solve the problems plaguing the sector.
“There are a lot of problems in the industry around not being paid fairly as per the minimum wage law, not being in compliant and so on. It’s a very long chain – you have the factory, then there’s a contractor, then the worker. The factory will pay the contractor and then there’s no transparency regarding how much the contractor would pay the worker,” says Dave.
While that was one side of the problem, the other side of it was the increased demand for workers by businesses.
During the first wave of Covid-19 and the subsequent lockdown there was a massive exodus of migrant workers who moved back to their villages in the absence of jobs. Now that the factories were reopening there was a dire need for labour.
The pivot
“We could see that on both sides our platform was not solving the problem. So, in 2022, we decided to pivot,” Dave recollects.
This time the idea was to not just offer a software layer, but on top of it be a full-fledged tech enabled staffing contractor which sources workers, finds jobs in the market for them, deploy them in factories and keep them on payroll.
The pivot however wasn’t an easy task. Sourcing, especially, was a major challenge.
The initial base of workers on the platform revealed that around 90% of the workers were not locals, but migrants from states such as Uttar Pradesh, Bihar, Jharkhand and West Bengal.
The company currently sources through three channels.
These include a worker-to-worker referral channel through which 70% of the workers are sourced, a ‘saathi sourcing channel’ where local influencers like village Pradhan or small shop owners become the advocates of the company, and skilling institutes with which the start-up has partnered. Smartstaff has so far partnered with more than 150 training institutes.
“If we get referrals of people who don’t match the skillset requirement, we match them with the training institutes so that they can learn the skillset free of cost and get placed,” Dave says.
The company currently has about 5,000 active workers on its platform.
Sector focus
Around 75% of the workers on the platform are from the textile manufacturing industry. There is also good demand for warehousing skills such as picker/packer/sorter followed by lathe operators and welders. According to the company, around 30% of the workers on the platform are women.
Once the worker is onboarded onto the platform, everything is digitised, Dave notes.
“The platform will keep track of your day - how many hours and overtime hours you have done. On a daily basis you can see how much money you have earned. You can also withdraw from the salary through the app.”
Bala Srinivasa, Managing Director at Arkam Ventures which has invested in Smartstaff believes the company is offering an efficient solution to an age-old problem.
“There are over 30 million migrant blue collar factory workers who traverse the length and breadth of the country to find good jobs, better skills and higher standards of living. Factories in turn are trying to meet soaring demand while trying to solve issues around attrition, work quality and skill.”
“Today there are over 10K workers and dozens of enterprises who use the Smartstaff platform and mobile app each day. The company has built a business that is twice as efficient as its competitors in terms of gross margins while scaling much faster,” he notes.
Differentiators
All said and done, the informal market has been controlled by traditional contractors for years now. So, what could give Smartstaff an edge over them?
The number of opportunities and the quality of opportunities, says Dave.
“It’s a very large market. Today there are about 2.5 million contractors in India in just manufacturing space alone and about 55-60 million workers. Each contractor has 25-30 workers mapped to them. One of the biggest differentiators for us becomes the scale.”
He further explains.
“If you are a contractor bringing 20-25 people from your village, at best you would have one or two factories on which you are dependent. Not having enough job opportunities become the biggest problem for a worker. For example, what workers mainly ask us is whether they would get 25 days of work in a month or not. With a traditional contractor, there’s a very good chance that one might not find paid work for all the days that one wants to work for. Whereas we have a huge number of job opportunities available with us.”
The second differentiator according to Dave is the kind of opportunities made available to the workers.
“Small contractors typically get you opportunities with smaller businesses that have a setup of 50+ workers. The working environment in such places is usually not great - you are forced to work for 15-16 hours a day, it’s not a very compliant or humane setup. Through us they get access to large enterprises which are compliant and offer transparency and reliability.”
He notes that Smartstaff works with large enterprises such as Raymonds, Arvind fashion, Richa Global, Pearl Global and so on.
Riding the formalisation wave
While Dave admits that initially they faced issues from companies that were not compliant, today there is a strong background verification process in place that filters out around 20% of the companies that want to partner with the start-up, he assures.
“It’s a very age-old problem in India - a lot of businesses are not very clean and compliant in the way they work. So, we have a very strong background verification process in place today.”
According to him there is also a strong undercurrent of businesses looking to formalise their ways lately, especially post Covid.
With respect to the workers, the company has onboarding centres where the workers are onboarded and their documentation is ensured.
“We get all of their KYC done. Since we get a lot of people from the informal ecosystem, we have to create bank accounts for 40-50% of workers, EPFO registrations for 50-60%, Aadhaar cards for 15-20%. We get all documentation done and send them for interviews.”
Smartstaff currently has presence in four cities including Bengaluru, Tirupur, Chennai and Delhi-NCR.
