Viraj Steel Saves 25 Percent of Salary Payouts with a Workforce Management Solution

Summary:

It took 58 people to keep attendance of Viraj Steel’s 7,000-strong workforce, and it still faced revenue leakages. So, IT stepped in with a workforce management system.

Highlights:

The new centralized system gives Viraj Steel a more complete picture of its workforce. Empowered by this information, Rao’s team prepares a monthly report with a precise and accurate picture of the workforce and integrates that with SAP payroll.In the last year-and-half, (the solution went live in January 2009), Viraj Steel has saved Rs 60 lakh a month. Apart from that, its 58-member attendance team has been shrunk to a 12 saving another Rs 5 lakh a month.

The Company: Ever wondered how much revenue your company could be losing every month in false employee claims? Viraj Steel will tell you it’s not a small figure. The Rs 4,500-crore company—a dominant player in India’s stainless steel industry with clients in over 90 countries—and learnt that lesson the hard way.

We had 58 people working on integrating our attendance books with payroll and yet we were taking over three weeks to process bills

The Business Case: In 2008, when global markets turned frugal, the company looked inward and analyzed the cost implication of some of its long-standing practices. Over half of Viraj Steels’ 7000-strong workforce is made up of contractual laborer who report at nine plants across the country. When Viraj Steel began reviewing their salary structure, it realized that its manual approach to attendance was wrought with problems. “We noticed serious anomalies in the attendance record of contractors on payroll,” says V.J. Rao, CIO, Viraj Steel. “But since our systems were decentralized, we weren’t able to quantify the precise deficit.” The company ran its salary application on SAP. But the arduous task of integrating paper-based attendance information into SAP pushed the stainless steel manufacturer to look for a smarter solution. “We had 58 people working on integrating our attendance books with payroll and yet we were taking over three weeks to process bills,” says Rao. The Project: That’s when HR turned to IT. Led by Rao, IT responded with a workforce attendance management solution. In partnership with Kronos, Viraj Steel installed 30 automated identity capturing machines across its plants. Laborers were given photo-access cards which they were required to scan at a terminal when they clocked in. The solution monitors when they enter and leave. First Steps: The new centralized system gives Viraj Steel a more complete picture of its workforce. Empowered by this information, Rao’s team prepares a monthly report with a precise and accurate picture of the workforce and integrates that with SAP payroll. As a result, today, Viraj Steel can pay salaries within two or three days of the start of the month, compared to the three weeks earlier. “We can now release salaries on time. I don’t think there is any company in India that releases its salaries within five days of the end of the cycle,” says Rajesh Jakhotiya, GM HR at Viraj Steel.

We had 58 people working on integrating our attendance books with payroll and yet we were taking over three weeks to process bills

The Benefits: But the biggest revelation of the project was how much Viraj Steel was bleeding every month from payroll leakages. Until the project, HR executives at Viraj Steel had no way of knowing that the number of laborers reporting to work was often far smaller than what was being promised by its contractors. “We realized that nearly 25 percent of salary pay outs was being pilfered in the form of dummy employees,” says Jakhotiya. In the last year-and-half, (the solution went live in January 2009), Viraj Steel has saved Rs 60 lakh a month. Apart from that, its 58-member attendance team has been shrunk to a 12 saving another Rs 5 lakh a month. The solution’s ROI? It paid for itself in days.