IT headcount may fall in Q1 as companies see dip in client additions

The hiring squeeze is driven by a greater focus on improving efficiency and margins, experts said. They expect these companies to restart hiring in the second half of the year if not in the next quarter.

During the previous quarter ended March, the top five Indian IT majors had reported a reduction in headcount of over 5,600 people. This was on top of a dip of around 5,000 jobs during the quarter ended December.

The trend is likely to continue in the April-June quarter, said Sunil C, chief executive of TeamLease Digital. “We expect this trend to continue as there is a larger focus on controlling attrition and utilisation improvement across the companies right now,” he said.

While the industry has witnessed some delays in lateral onboarding, by the end of the fiscal second quarter, TeamLease expects that many of the firms will have used up their existing resources and will look for additional talent.

“Most of the companies are now reaching 75-80% utilisation. Hence, we expect that once they reach that milestone they will need to start adding additional resources,” Sunil said. “So, we expect that while these won’t be high numbers, hiring across services companies will open up in the second quarter of the fiscal.”

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The slower hiring trends have impacted employee onboarding as well with many companies continuing to delay fresher and lateral hiring as they await clarity in client requirements.Most of the hiring seen in the first quarter of 2023-24 has been for replacing critical roles lost to attrition.

According to foundit Insights Tracker report on job growth for May published last week, the BPO/ITES sector faced challenges with a headcount decline of 17% year on year last month. The report found that recruitment in the IT software and hardware sectors was down 20%. Bengaluru, which is the top destination for IT sector roles, saw a 24% year on year decline in hiring activity in May, the report said.

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A R Ramesh, director – managed services and professional staffing at Adecco India, said the IT services talent market continues to be under pressure with no immediate signs of recovery, although demand for IT product talent is faring relatively better.

“We expect the July-September to also remain muted with subdued hiring sentiment as economic recovery is not moving as expected,” he said.

Most IT companies are resorting to a cautious approach to hiring for critical positions. However, the demand for temporary workers is comparatively better, Ramesh said.

Tata Consultancy Services and Wipro, in their recently released annual reports, have called out the volatile global environment with respect to technology spending. Wipro chairman Rishad Premji’s compensation was down almost 50% in FY23 due to negative performance by the IT Services business.

Sandeep Gulati, managing director of Manpower Group India, said for the July-September quarter, around 36% employers still seek to hire more resources. “Hiring intentions improved quarter over quarter… However, (they) continue to be lower when compared to this time last year,” he said.

“The IT labour market has been largely driven by global demand and employers are continuing to be cautious in their hiring spree to avoid layoffs and maintain a minimum bench,” Gulati said.