Mumbai/New Delhi: High employee expenses have prompted information technology (IT) companies to defer onboarding and promotions to initiate strict cost control measures. A weak deal pipeline and poor visibility for the next couple of quarters has compelled Tata Consultancy Services (TCS), HCL Technologies and Wipro to set minimal hiring targets.
Mumbai/New Delhi: High employee expenses have prompted information technology (IT) companies to defer onboarding and promotions to initiate strict cost control measures. A weak deal pipeline and poor visibility for the next couple of quarters has compelled Tata Consultancy Services (TCS), HCL Technologies and Wipro to set minimal hiring targets.
A Mint analysis found that in the first quarter of the financial year, wage costs as a share of revenue increased for all three companies to a record high in the last at least five years.
A Mint analysis found that in the first quarter of the financial year, wage costs as a share of revenue increased for all three companies to a record high in the last at least five years.
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Click on the image to enlarge
TCS had the highest burden of employee costs as a share of revenue among the three IT giants, because revenue had consistently grown slower than wage costs. Of the last eight quarters, year-on-year wage costs growth outpaced revenue growth five times for TCS, seven times for HCL, and all eight times for Wipro.
TCS had the highest burden of employee costs as a share of revenue among the three IT giants, because revenue had consistently grown slower than wage costs. Of the last eight quarters, year-on-year wage costs growth outpaced revenue growth five times for TCS, seven times for HCL, and all eight times for Wipro.
“Q1 bellwether results are emerging largely bittersweet for tech talent. Low-to-no net headcount additions are bad news for freshers and entry-level talent,” said Kamal Karanth, co-founder of Xpheno, a tech recruitment firm.
“Q1 bellwether results are emerging largely bittersweet for tech talent. Low-to-no net headcount additions are bad news for freshers and entry-level talent,” said Kamal Karanth, co-founder of Xpheno, a tech recruitment firm.
Growth in employee costs despite the drop in attrition is a sign that IT firms are looking at lateral hires to meet niche demands, a move that is proving to be expensive.
Growth in employee costs despite the drop in attrition is a sign that IT firms are looking at lateral hires to meet niche demands, a move that is proving to be expensive.
In the April-June quarter, the attrition rate for the three companies continued to fall, maintaining the trend for over 4-5 quarters. While TCS’ attrition rate stood at 17.8% versus 20.1% in March quarter; HCL’s attrition declined from 19.5% to 16.3% sequentially. Wipro’s attrition dipped from 19.2% to 17.3% in the Q1Fy24.
In the April-June quarter, the attrition rate for the three companies continued to fall, maintaining the trend for over 4-5 quarters. While TCS’ attrition rate stood at 17.8% versus 20.1% in March quarter; HCL’s attrition declined from 19.5% to 16.3% sequentially. Wipro’s attrition dipped from 19.2% to 17.3% in the Q1Fy24.
“We’ve been able to streamline operations, reduce number of overheads, just remove some of the layers of unproductivity,” said Wipro’s chief executive officer Thierry Delaporte on Thursday. The company will calibrate hiring plan depending on the business but has not recruited any freshers in the June quarter.
“We’ve been able to streamline operations, reduce number of overheads, just remove some of the layers of unproductivity,” said Wipro’s chief executive officer Thierry Delaporte on Thursday. The company will calibrate hiring plan depending on the business but has not recruited any freshers in the June quarter.
“Leadership hiring in large IT services firms is expected to pick up October onwards and firms for now are largely witnessing muted growth. Currently, the open numbers are well managed by the internal recruiting teams,” Ritu Sethi, partner, technology practice at ABC Consultants, said. Sethi expects FY24 to be a “cost conscious” year for the IT sector.
“Leadership hiring in large IT services firms is expected to pick up October onwards and firms for now are largely witnessing muted growth. Currently, the open numbers are well managed by the internal recruiting teams,” Ritu Sethi, partner, technology practice at ABC Consultants, said. Sethi expects FY24 to be a “cost conscious” year for the IT sector.
Recruitment numbers show frugality in hiring mandates, which has even impacted campus recruitments. Increasing employee costs led to a modest increase in employee strength for TCS, with 523 new recruits compared to 821 in the previous quarter. Milind Lakkad, the chief human resource officer of TCS, said on 13 July that it will continue to clock lower net headcount additions in the current fiscal year.
Recruitment numbers show frugality in hiring mandates, which has even impacted campus recruitments. Increasing employee costs led to a modest increase in employee strength for TCS, with 523 new recruits compared to 821 in the previous quarter. Milind Lakkad, the chief human resource officer of TCS, said on 13 July that it will continue to clock lower net headcount additions in the current fiscal year.
HCL Tech posted a sequential decline of 2,506 employees, but hired 1,597 freshers, a significant drop from 4,480 in Q4FY23. According to Wipro’s results announced on Thursday its headcount dipped from 256,921 in March to 249,758 in the June quarter. Infosys will post its results on 20 July.
HCL Tech posted a sequential decline of 2,506 employees, but hired 1,597 freshers, a significant drop from 4,480 in Q4FY23. According to Wipro’s results announced on Thursday its headcount dipped from 256,921 in March to 249,758 in the June quarter. Infosys will post its results on 20 July.
Industry experts said muted demand will impact the variable pay component of employees, and only the top talent will be awarded a greater chunk.
Industry experts said muted demand will impact the variable pay component of employees, and only the top talent will be awarded a greater chunk.
“The impact will be on variable pay, delays in mandate closures and focus on employees with niche skills. We do not expect the recruitment pace to pick up in this sector over the next couple of quarters,” said Aditya Narayan Mishra, CEO of CIEL HR Services.
“The impact will be on variable pay, delays in mandate closures and focus on employees with niche skills. We do not expect the recruitment pace to pick up in this sector over the next couple of quarters,” said Aditya Narayan Mishra, CEO of CIEL HR Services.
TCS has rolled out 8-10% for high performance and 12 to 15 % for exceptional performance in annual compensation review. Wipro said it will roll out about 80% variable payout for the fiscal first quarter.
TCS has rolled out 8-10% for high performance and 12 to 15 % for exceptional performance in annual compensation review. Wipro said it will roll out about 80% variable payout for the fiscal first quarter.
