Hiring by IT firms fell 96% in the third quarter compared to the previous seven quarters, despite a drop in attrition.
- ByStartupStory | January 17, 2023
Even though attrition rates have decreased due to worries about an impending recession in their core markets, the United States of America and Europe, Indian IT services companies are being cautious when it comes to hiring.
The top four IT firms in India, TCS, Infosys, HCL Tech, and Wipro, added a total of 1,940 new staff in the third quarter of FY23, the fewest in the previous eight quarters.
These four IT companies had, on average, added 53,047 new staff during the previous seven quarters. Comparatively, hiring fell by more than 96% in Q3.
The sharp decrease in hiring is notable, but so have the previously high pay expectations. According to TCS Chief Financial Officer Sameer Seksaria, “it is obviously helping out because more so on the raised expectations of pay and the backfilling retention expenses that have come down is definitely benefiting on the margin side.”
TCS announces its first headcount decrease in ten quarters, claiming that it was “planned.”
For the first time in the previous ten quarters, TCS, the largest IT business in India, recorded a fall in personnel in Q3. However, Milind Lakkad, the company’s chief human resources officer, claimed that rather than being a sign of a blip, this reduction was “planned.”
Lakkad tried to explain the reduction in headcount, saying, “That does not indicate anything on the demand side. Demand is high, we are just operating very efficiently right now.”
In terms of staff cuts, Wipro joined TCS. The Bengaluru-based company announced a 435-employee reduction in its payroll, a quarter after announcing the slowest net hiring in the previous eight.
The only companies to record a net increase in personnel were Infosys and HCL Tech. Even for Infosys, the company added employees at the slowest rate over the previous eight quarters. On the other hand, hiring at HCL Tech fell by 65% sequentially during the quarter.
Each quarter in FY22, these four IT companies averaged over 60,000 new hires. In FY23, hiring slowed down even more, with Q2 seeing a steep drop to 28,836 net recruits.
TCS and Wipro are in the lead for hiring cutbacks as a result of the workforce reduction in Q3, followed by Infosys and HCL Tech.
Attrition rates are declining
Since the start of FY22, high attrition rates have been one of the biggest problems for Indian IT companies. The second-largest Indian IT business, Infosys, reported an attrition rate that peaked at 28.4% in Q1 FY23. But in Q3, all four IT firms reported a decline in attrition rates of 20 to 280 basis points. One percent is made up of 100 basis points. The largest reduction was reported by Infosys, which had the greatest attrition rates over the preceding four quarters. It still has the greatest attrition rates among the four organisations, although Wipro has the lowest.
IT businesses take precautions
Indian IT companies are in a “wait and watch” attitude due to fears about the recession and the associated lack of clarity around demand. During the Q3 earnings, the CEOs of the two biggest businesses, TCS and Infosys, issued a warning.
“Europe is a problem and the US whether it’s a problem or not, time will tell. The overall demand scenario has not changed significantly and we will know more in a few more months. Everyone went into December being very cautious,” said TCS CEO Rajesh Gopinathan, but added that the company is positive on the US market.
Salil Parekh, Gopinathan’s Infosys colleague, noted that despite the company exceeding analyst projections, there are indications of a weakening global economy. “While we are encouraged by the immense confidence and trust our clients have in us, the signs around are showing a slowing global economy,” Parekh said.
He also listed the industries most affected by recessionary worries, including telco, high-tech, retail, and mortgages and investment banking in the financial services sector. He claimed that these indicators are causing spending confusion and delays in decision-making.
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