With the IT results season set to kick off with TCS declaring the numbers on June 12, one closely examined metric would be attrition, which is expected to have come down substantially. With start-ups unable to lure talent due to funding winter and new order inflow at services companies low and hiring impacted, attrition is also expected to come down.
Attrition rates in IT firms have been on a declining trend for the last couple of quarters. From 24-26 per cent, it fell to 20-21 per cent over the last year. Infosys, for instance, saw attrition rate drop from 28.4 per cent in Q1 FY23 to 20.9 per cent in Q4 FY23.
In the quarters to come, attrition rates will drop even further due to certain factors. According to staffing firm Xpheno, average attrition among Indian IT service bellwethers could drop to the 18 per cent mark for Q1 after 19.5 per cent in the previous quarter. This is a significant 5.5 per cent year-on-year drop over 23.5 per cent recorded in Q1 2022.
Kamal Karanth, co-founder, Xpheno, told businessline: “Talent retention, clubbed with dropping active demand in the job market, contributed to attrition rates dropping over the last three quarters. While a 5.5 per cent y-o-y drop is significant, reduced attrition rates are still well above the 13-14 per cent average desirable attrition range for the IT services cohort.”
Further, 20 per cent of talent in the IT services sector has had at least one or more job switches over the last 12 months, despite record low talent demand. This combination of simultaneous high attrition and low hiring demand is unusual and intriguing, he added.
Hiring slows down
Hiring, too, has slowed down significantly in the sector, as it faces tough macro-economic environment. The top five IT companies in India added 84,000 new employees in FY23, a decrease of more than 50 per cent from the 2.7 lakh added in the previous fiscal year due to poor demand and fall in tech spending.
Attrition levels had skyrocketed as the demand for tech talent had significantly gone up with other cohorts such as start-ups and global capability centers (GCCs) eying for the same talent pool.
However, given that start-ups are facing a funding winter and have not been hiring as much, perhaps even firing employees, the IT sector has better accessibility to the said pool, although GCCs are still actively hiring tech talent, more so than the IT services companies in recent times.
Published on July 11, 2023
