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Growing attrition and overburdened employee costs worsen lines of concern amid robust Q1 hiring by Top It Cos

By PTI IST (Released)


Industry experts, cautiously, say the war for IT talent could continue until the pool of industry-ready labor is significantly expanded.

Net hiring by major Indian IT companies topped the 50,000 mark in the June quarter as deal flow continued in key markets, but growing attrition, margin pressures, overhead HR costs and employee-related challenges have brought the industry to a standstill.

Industry experts, cautiously, say the war for IT talent could continue until the pool of industry-ready labor is significantly expanded.

As IT companies are forced to fill vacancies to meet incoming demand and non-tech companies seek tech talent to meet the needs of their digitally savvy consumers, market watchers believe that employee issues will keep the IT industry on edge. the razor blade.

Consider this. Net hiring by the three major IT companies – Tata Consultancy Services (TCS), Infosys and Wipro – crossed the 50,000 mark in the June quarter. There has been no meaningful moderation on full-year hiring targets yet, as the industry says technology demand in the US and Europe has held steady so far, despite the fears of an impending global recession.

According to Sunil C, CEO of TeamLease Digital, six million (60 lakh) new tech jobs are expected to be created in total over the next five years. As the hiring spree emboldened tech professionals, lines of concern began to emerge among IT employers over unprecedented levels of attrition, rising labor costs work and issues such as moonlighting (technicians taking side gigs to work on more than one job at a time).

The recent reduction in variable compensation by companies such as Wipro and Infosys reflects the extent of pressure on margins. And rumors of a possible slowdown in global trade momentum are sure to add to the industry’s woes.

“In the short term, IT companies will continue to experience margin pressure as there is a cost overhead while there is no increase in deal structure. Once companies put By having the right talent management strategy in place and executing the cost optimization projects, they will be able to improve their margins,” according to Sunil of TeamLease Digital.

Companies can also try to secure new projects and renew contracts at a better price by factoring in factors such as inflation and rising costs, but this may be easier said than done.

India’s second-largest IT services company, Infosys, led the hiring spree with a net addition of 21,171 professionals in the June quarter, as attrition reached 28.4% from 27.7% in the quarter of March 2022 and 13.9% a year ago. Rising employee benefit expenses, outsourcing costs and travel expenses drove up overall costs at the Bengaluru-based company in the June quarter.

Compensation increases impacted margins by 160 basis points and utilization fell due to the impact of new entrants, although Infosys said it continued to optimize various cost levers to increase efficiency of operations.

With operating margins around 20% in the first quarter of FY23, Infosys maintained its margin guidance at 21-23% for the full year, but made it clear that with the increase in the cost environment, it will be in the lower part of the margin outlook. .

More recently, Infosys reduced the average variable payout for employees to around 70% for the June quarter amid squeezed margins and high payroll costs. Infosys isn’t alone in biting the bullet on variable payments. Wipro withheld variable employee compensation due to pressure on margins.

Managers at the company’s C-suite level will not receive any portion of variable pay, while employee ranks between entry-level and team leaders will receive 70% of total variable pay. Net hiring for Wipro was 15,446 professionals for the June quarter, while the attrition rate was 23.3%, compared to 23.8% in the March quarter and 15.5% a year ago. a year.

As IT companies fight a pitched battle on the HR front, issues like “black work” in the tech industry have also sparked a new debate.

Wipro President Rishad Premji recently took to Twitter to highlight the issue, saying, “There’s a lot of talk about people moonlighting in the tech industry. It’s bullshit. cheating – plain and simple.”

Sunil of TeamLease Digital says the war for tech skills or tech talent won’t just be limited to IT companies, but also telecoms, engineering, retail, healthcare and others who launched major digitization campaigns.

“There is a huge opportunity opening up even in non-native IT businesses and we are seeing a month-to-month increase in technology requirements in the non-IT space,” he revealed.

For TCS, net hiring was 14,136 professionals in the June quarter of this fiscal year and its attrition increased to 19.7%, compared to 17.4% in the previous sequential quarter and 8.6% in the during the same period of the previous year.

According to Anurag Malik, Partner – People Advisory Services at EY India, India’s hiring spree in recent quarters has been driven by unprecedented high demand for digital skills across industries to navigate the rapid adoption of technology after the pandemic.

Deloitte India Director Vamsi Karavadi noted that while the hiring is “definitely positive” from an employee perspective and a validation of talent abilities and skills in India, it “has challenged organizations to redefine their employee value proposition.

“Hiring has definitely reached pre-pandemic levels and in some niche skills has exceeded them as well,” Karavadi said, adding that bonuses for niche skills reflect the surge in demand seen over the past 6 to 6 years. last 8 months.

Malik (EY India) asserts that the solution to HR challenges in the IT sector is to engage the internal workforce to curb staff turnover, ensure workforce sustainability through skills, career advancement opportunities for staff, attracting the right talent and prioritizing learning experiences. as well as employee well-being.

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