Labour pains of call centre outsourcing

In August this year, an employee of a mobile phone operator had planned to wed his long-time sweetheart.

He planned to finance the wedding with savings from the salary he earns as a call-centre operator at Essar Telecom Kenya, which runs the yu mobile brand in Kenya.

“I have not informed anyone including my fiance,” says the employee, who talked on condition of anonymity because of the embarrassment this would cause. “But I have cancelled my wedding plans. I cannot afford it with my new salary.”

For this story we baptise him as Bob. In April last year Essar Telecom, seeking to cut costs to remain profitable in the highly competitive mobile market, outsourced its call centre to its sister firm, Aegis Services Ltd.

This came with some unpleasant surprises for Bob and other employees working in customer service: they were required to reapply for their positions to Aegis and – you guessed it – their salaries were slashed by half.

An entry level customer service executive was paid about Sh80,000 at Essar. But when they moved to Aegis, the salary dropped to between Sh35,000 and Sh40,000. Some opted to resign but others, including Bob, stayed the course for lack of a better option.

A tale of two employers

Early this month, things moved from bad to worse when Kenya’s third-ranked mobile operator in terms of market share, terminated its contract with Aegis Services Kenya Ltd, raising anxiety in over 70 customer care employees.

It engaged Horizon Contact Centre to handle its call centre services and the affected employees have been asked, once again, to reapply.

Aegis, in its communication to employees, said its contract had been terminated by Essar Telecom and was exiting Kenya.

“The business has been awarded to a new service provider,” it said. “As a result Aegis has been given notification that they were not the successful service provider.”

Some of the employees, whose contracts expired on February 28, this year, said most have not been recruited by Horizon while those who have been taken in will get nearly half of their current pay.

According to documents seen by Smart Company, a customer service executive who has been getting Sh36,000 will get Sh17,000, a month under the Horizon Contact Centre contract.

They have also kissed goodbye to medical cover that they enjoyed at Aegis and will have to work one day extra for less pay. At Aegis, they worked five days a week, but at Horizon, they will do six days.

Outgoing Essar Telecom Kenya country manager Atul Chaturvedi declined to discuss salary issues raised by employees, saying the mobile phone operator has no role in deciding contractual terms of the agents.

“It is solely the responsibility of the new partner,” he said. “In this case also all such terms are being administered by Horizon, our new call centre partners, in line with their corporate policy and processes.”

Horizon Contact Centre management refused to comment. In 2009, the Indian steel-oil-telecoms conglomerate, Essar Group, took control of Econet Wireless Kenya Ltd and renamed it Essar Telecom Kenya Ltd.

Operating as yu, the firm initiated major cost-cutting initiatives, surviving on lean budgets. This saw the exit of the firm’s first chief executive Michael Foley, just six months after he was appointed to the role.

His deputy, Mr Srinivasa Iyengar, took over but did not last more than a year before Mr Chaturvedi was brought in from India. Just this month, Mr Madhur Taneja, from Warid Telecom in Uganda replaced Atul Chaturvedi.

The yu case has shone the spotlight on outsourcing some jobs as a cost-cutting model, where apart from quality service companies are seeking to reduce cost.

Many - from mobile operators to banks and insurance companies - are delegating the running of customer care and network management facilities.

Earlier this month, Airtel Kenya, the second largest mobile operator in Kenya, transferred its customer care staff to Indian business processing outsourcing (BPO) firm, Spanco.

Indian BPO companies are not known for paying competitive salaries and are magnets for companies seeking cheap labour globally.

Some 61 employees on permanent contracts and several others on short-term contracts with Airtel Kenya have since been moved to Spanco.

One of the employees at Spanco will be earning Sh61,011 basic salary, including a shift allowance of Sh1,500 and leave allowance of Sh800.

Sources said this is lower than what Airtel paid them. Newly employed staff are getting just below Sh20,000, according to people familiar with the matter, and may do without medical cover.

The operator had previously outsourced its network management to Nokia-Siemens and its information technology to IBM.

From a cost-cutting point of view, this is a no-brainer. Heightened competition has seen mobile tariffs reduce to as low as Sh1 per minute, coupled with the enlisting of subscribers with low disposable income has seen the average revenue per user drop to record lows.

Most operators expect big drops in earnings. This contrasts other sectors like banking and energy, which are churning out super profits and staff pay rises wouldn’t be much of a problem.

Ms Jacqueline Mugo, the executive director of the Federation of Kenya Employers, says although the Essar case raises questions, it is still outsourcing, which is legal.

“There is no law against it,” says Ms Mugo adding that while the reasons behind the switch from Aegis to Horizon would need to be looked into, the employer is free to make decisions in the best interests of his business and allow the party providing outsourced services to manage employees.

For many Kenyan workers, outsourcing evokes images of corporate downsizing and pink slips. Nairobi-based legal expert, Mr Titus Koceyo, says there is a growing concern where employers use tricks to terminate old contracts and replace them with new ones that come with less benefits.

“This is illegal,” said Mr Koceyo, who noted the issue is widespread in Kenyan companies. “They are using the back door to terminate existing employment. This denies employes the benefits for the years accrued.”

In the Airtel and yu cases, employees transferred to outsourcing companies are worried about their benefits. “Airtel has transferred the years of service including pension to Spanco without consulting and giving employees an option, meaning if an employee resigns today he/she will lose the years of service,” the employees say in a confidential memo detailing their grievances.”

And how this was done also raises eyebrows. “Employees were called to a meeting,” the memo adds, “and were handed the 26-page employee handbook and a seven-page contract and given 10 minutes to go through them and sign it.”

Mr Koceyo, the lawyer, says he is handling numerous cases where companies force employees to sign new contracts and terminate them after sometime. This way affected employees forfeit benefits for the years worked.

“What they are doing is cutting costs and because many employees fear being sacked, they have found themselves being thrown out after a short while,” he says, adding that staff have a right to claim benefits for years worked.

And where there is no strong union, employers use that loophole to manipulate contracts because employees have no strong voice to represent them.

“The fact that you have signed a new contract means you forfeit previous benefits. You stand a stronger position to claim your benefits if you don’t sign,” says Mr Koceyo.

“Before you sign that document, let the employer clarify on accrued benefits. This way you will be sure what you are doing. Don’t feel intimidated.”

Trade union braced for battle

Airtel Kenya managing director Rene Meza, who did not want to be drawn into the contracts issue, said: “We do respect the law and do not place any form of restriction to the freedom of association for our members of staff.”

After it outsourced customer care, information technology and its tower or network management units, Airtel has remained with a lean staff, and many are in management, cutting them from joining unions.

And the trade union movement is furious. “The Constitution gives every worker the right to fair labour practices - good remuneration, freedom to form, join or participate in the activities and programmes of a trade union and to go on strike,” said Central Organisation of Trade Unions (Cotu) secretary general Francis Atwoli, citing the Bill of Rights in the new Constitution. 

He said the Communications Workers’ Union would file a case in court under a certificate of urgency to compel three mobile operators - Safaricom, Airtel and Essar Telecom - to recognise it (union) and the need for a collective bargaining agreement.

Mr Benson Okwaro, the secretary general of the union, said they have a problem with the three operators for denying their employees the right to join unions. “This means that employees have nowhere to turn to when they are sacked,” said Mr Okwaro, who is Mr Atwoli’s deputy at Cotu.

He said they are waiting for communication from the Ministry of Labour to proceed with litigation. “At the moment we are not able to recruit because employees are scared of being victimised,” he adds.

Safaricom’s chief human resources officer Mr Joe Ogutu said it does not have a formal agreement with the union and until then it won’t recognise it. “None of our employee has ever lodged a proposal to join the union,” Mr Ogutu said, adding that the firm would not prevent anyone.

But it is not the mobile operators alone that are tightening their belts in the face of increasing competition and shrinking revenues.

In the past few years, companies have carried out mass layoffs to cut costs. In a bid to cut swelling payroll costs, Barclays Bank of Kenya is retiring about 200 middle-level managers.

Similarly, Kenya Commercial Bank is carrying out a restructuring that will see a good number of staff go home to reduce expenses by 20 per cent.

And when oil marketer Shell announced its intention to sell its downstream oil marketing business, more than 180 employees of Kenya Shell went to court to block the oil marketer from selling its business until their statutory dues are settled.

Alternatively, the employees wanted Shell to declare them redundant and settle all their severance benefits and accruing claims instead of transferring them to the new owners.

In the past Shell and its employees have been at loggerheads over benefits. Soon after Shell acquired Agip (K) Ltd, the firm declared more that 90 per cent of the employees redundant even after having promised continued employment.

Shell’s employees wanted an exit offer that affords them an option to transit to the new owner or a buy-out of employment contracts.

Private security firms are becoming notorious with the tricks of shortening contract period. But legal experts warn that the corporate world is sitting on a time bomb in changing employees’ terms of service.

“If all employees whose contracts have been terminated illegally are to seek legal redress, many companies will be in major crisis,” said Mr Koceyo.