In Q1, headcount at IT companies shrinks sharpest in three years

Six leading Indian IT services companies that have announced first-quarter earnings recorded the sharpest contraction in headcount in the last three years in the April-June period. Aggregate staffing at Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro, LTIMindtree and L&T Technology Services (LTTS) contracted by 18,000, worse than a negative 9,000 in the June quarter of 2021, which was during the pandemic, according to data compiled by Xpheno for the last three financial years.

To be sure, two out of the six were in positive territory – TCS, the country’s biggest IT company, added 523 and LTTS added 1,159 in the quarter.

“With four out of the six quarterly net headcount movements in deep red, the two minor positive movements bring little cheer,” said Xpheno cofounder Kamal Karanth. “FY24 has definitely got off to a shaky start.”

Companies in the IT sector are feeling the heat of the slowdown in projects. As a result, Infosys has cut its FY24 revenue growth estimate to 1-3.5% in constant currency terms, against 4-7% earlier.

“In the short term, we see some clients stopping or slowing down transformation programmes and discretionary work,” Infosys chief executive officer Salil Parekh had said while announcing Q1 results.

The numbers are based on earnings statements. Tech Mahindra will announce results later this month. TCS, Infosys, HCLTech, LTIMindtree and LTTS didn’t respond to queries.

Talent moving even in slow market
“Our attrition rates have been steadily declining throughout FY23 and we ended the last quarter with 14.1% attrition,” a Wipro spokesperson said. “Over the past few years, we have put in place several initiatives to streamline our policies… We are starting to see the results of these initiatives.”

Attrition for the six companies is down to 17.6% in the June quarter from 20.4% in the March quarter and 23.7% in the year earlier, according to Xpheno.

“Average attrition… still remains well above the 13-14% desirable attrition range for the IT services cohort,” said Karanth.

A fifth of the talent in the IT services sector has had at least one or more job switch over the last 12 months, according to the Xpheno talent movement monitor.

“Talent seems to have found a hack to keep moving even in a low and slow market,” said Karanth.

Infosys, HCLTech and Wipro recorded a drop in overall headcount, down 6,940, 2,506 and 8,812, respectively, as attrition eased. A cumulative drop among the top four-TCS, Infosys, HCLTech and Wipro-had been recorded three years back.

Human resource experts said the rest of the year is mostly expected to remain dull too, including the recruitment of freshers. This is mainly because of the drop in attrition and companies planning to go slow on fresher hiring and actively deploying benched employees instead.

Companies hired in advance anticipating a large number of IT deals from the end of 2021 till a fair bit into 2022, said Yeshab Giri, chief commercial officer, staffing and Randstad Technologies, Randstad India.

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