Today, it’s the exact opposite – it’s a job keeper’s market. Employee attrition rates have fallen by a third to a half of what it was a year ago, reducing also the bargaining power of IT professionals.
TCS‘s attrition rate dropped to 14.9% in the September quarter, compared to 21.5% in the year-ago period. Infosys‘s attrition rate nearly halved to 14.6% from 27.1% during the same period.
Demand for tech had surged when the pandemic forced the world into a remote work and remote transactions mode. The big four Indian IT firms increased their net addition of employees nearly threefold to 2.4 lakh in the 2021-22 financial year, compared with 90,813 the year before. TCS alone added over 1 lakh employees in that year. As attrition levels grew, many overhired in the expectation that attrition rates could further rise.
However, over the past year, weakening global macroeconomic conditions and geopolitical events like the Ukraine war have led to a slump in IT demand. IT companies have been forced to cut hiring. In several recent quarters, the overall employee strength for some companies has dropped, given that fresh hiring did not compensate for those who left the company.
Ramkumar Ramamoorthy, partner at growth advisory firm Catalincs, says attrition is a function of opportunities and growth. “With industry growth decelerating at a rapid clip, attrition is also coming down sharply,” he says. During the growth phase, he says, some companies were seeing 25-40% annualised attrition for almost eight quarters in a row, which meant that 40-50% of their employees left the company. “Given that the backfilled employees do not want to leave companies within one or two years of joining, that is also leading to much lower attrition numbers,” he says.
Phil Fersht, CEO of US-based HfS Research, says Indian IT services majors are carefully allowing natural attrition to rebalance their delivery organisations as they continue to look to rationalise costs and keep wage inflation under control. “For most of the year, they have not been backfilling attrition, but TCS mandating a return to work has led to a spike in attrition they will likely be forced to backfill. I would be surprised to see any aggressive hiring in India over the next six months, but there is more focus on some specialist roles in areas like genAI to meet customer demand,” he says.
Hansa Iyengar, senior principal analyst in London-based Omdia, says IT firms haven’t stopped backfilling but are looking at increased automation which reduces the number of people required to complete a task and makes existing resources more productive. “This trend is expected to continue where existing staff are reskilled and increased automation & AI is used to augment them, reducing overall dependency on human resources for routine/mundane tasks,” she says.