Fears of a global recession and a wave of layoffs in the start-up space are expected to have a sobering effect on high attrition levels in India’s IT industry over the next 2-3 quarters, according to market watchers, while the majority of big tech companies are talking about easing supply side pressures in the September quarter.
Infosys, whose high levels of attrition had at one point alarmed analysts, reported a 27.1% drop in attrition in the just-ended quarter, compared to 28.4% in the last quarter. June.
For Wipro, attrition fell to 23% in Q2FY23 from 23.3% in the prior quarter. Attrition rates for HCL Tech had increased since the quarter ended September 2021 (15.7% in Q2FY22), but plateaued at 23.8% in Q2 FY23, remaining at the same levels as the June quarter (T1FY23).
“It’s already stabilized, and that’s a first indication of where we are in terms of where we look forward to, going forward. So we’re well positioned there,” said Ram Sundararajan, Human Resources Manager of Noida-based HCL. Tech said during the second quarter earnings briefing.
Tata Consultancy Services (TCS) said its LTM or Last Twelve Months attrition in IT services had increased further to 21.5%, but the company was quick to add that it would start to see churn.” settle” in the coming months.
The tech labor market, which had overheated in recent quarters, has begun to cool, and compensation expectations for new hires are also becoming more realistic, the company said on the earnings call.
Overall, the second quarter dashboards of Indian tier 1 tech companies clearly indicate that supply-side pressures should ease.
Milind Lakkad, TCS Director of Human Resources, said: “With supply catching up across the industry, the pressure to poach experienced talent is easing. So we should start to see churn rise. stabilize in the coming months. Based on monthly trends, we believe our quarterly annualized attrition figure peaked in the second quarter and should begin to moderate in the second half.”
India’s largest IT services company saw net additions of 9,840 employees in the quarter, with a closing headcount of 6.16 lakh professionals.
TCS said its most recent FY23 integration is going according to plan. The company honored all the offers it made and onboarded 35,000 freshmen in the first half of the fiscal year and 20,000 were onboarded in the second quarter alone.
Infosys – which competes with TCS, Wipro and HCL Technologies in the top tier of outsourcing contracts – reported a respite in attrition levels, which hovered higher than its peers.
“Our attrition has now been declining for three quarters on an annualized quarterly basis, now including the second quarter, and we are seeing that trend down,” Infosys CEO Salil Parekh said on the recent earnings call. .
The second quarter report of India’s Tier 1 IT companies last week came amid a challenging macroeconomic scenario in the United States and Europe, the mainstay of India’s IT industry.
Storm clouds over the global economy have prompted economic commentators to issue warnings of recession risks and international market shocks to come.
Reports suggest that US-based companies, including many tech companies, laid off thousands of employees in 2022 alone and held back hiring.
Back home, market watchers are divided on whether the cost optimization programs of US and European companies will continue to generate significant outsourcing gains for Indian service providers in the coming quarters, sufficiently to compensate for any slowdown or pause in discretionary IT spending in constrained customers.
Wipro’s voluntary attrition measured in the last 12 months of the quarter was 23%, a 30 basis point moderation from the June 2022 quarter. Its attrition rate was low at 20.5% during of the second quarter of fiscal year 22.
As of September 30, 2022, the number of Wipro employees in IT services increased to 259,179 from 258,574 at the end of June. Wipro added 605 net employees.
Industry veteran Ganesh Natarajan observes that despite gains on employee retention in the quarter just ended, industry attrition is still higher than levels seen in the past.
He expects attrition levels to fall into the late teens over the coming quarters as macro concerns are sure to weigh on the minds of IT professionals, who until a while ago were spoiled for choice with multiple vacancies on the market.
“Most people realize that in difficult times, big companies will do better, compared to small companies. So maybe now is not the time to take the leap. People worry also from the collapse of some start-ups,” Natarajan said.