This comes after several quarters of a battle for talent that saw companies doling out huge salary hikes to attract skilled employees.
Attrition has tapered from peak levels of 25-30% last year to about 20% in the December quarter and the consequent lag in salary hikes is likely to help companies improve operating margins, which have been under pressure due to the high cost of talent.
“Our key challenges were high attrition and leading to higher backfilling cost and subcontractor and retention costs. Now this entire cycle is settling down,” said Samir Seksaria, chief financial officer at Tata Consultancy Services (TCS). “The elevated expectations of salary are much lower now and retention will not be a concern,” he told ET recently.
For each of the top four IT service providers, the attrition metric further slid on a sequential basis. Human resource experts attribute this to the challenging macro environment and layoffs among global tech giants and startups.
“Salary demands have now normalized to a large extent. The salary expectation for candidates with 3–7 years’ experience was averaging at more than 75% (hike) a year ago for a job switch and now it has tempered down to realistic levels of 30% plus,” said AR Ramesh, director, managed services and professional staffing, Adecco India.
Discover the stories of your interest
The reason for the drop is because of wage stabilization, driven by lesser demand and lack of surplus job opportunities to switch, compared to a year ago, while supply has also increased given the layoffs across the tech industry, Ramesh added.TeamLease Digital CEO Sunil C said with the general tightening of talent requirements, layoffs and global market concerns, employees have become more cautious about switching jobs.
As of December 2022, there has been a 40% dip in salary hike expectations across the market compared to the year before.
“It is fair to state that the hike when someone changes jobs has dropped from 70% to 30%,” Sunil added.
Companies, especially non-tech firms, have welcomed the development as they can finally afford talent that was previously not within their budgets.
“The current salary expectations in the market allow many non-IT players to hire technical talent which they could not do in the 2021 cycle due to high compensation expectations in the market,” Sunil said.
Non-tech companies are now poaching tech talent, though at a slower rate, because they could not afford the talent auction seen last year.
Apart from macro challenges restricting job changes, companies like Infosys and Wipro have promoted internal candidates and that has helped these companies lower attrition levels.
Infosys’ internal project on “predictability of promotions” is continuing unabated and one of the factors that is helping in lowering the attrition rate, said chief financial officer Nijanjan Roy.
Cross-town rival Wipro, too, had promoted 10,000 candidates internally in the second quarter and another 6,000 employees in the December-ended quarter.
