economy

What a drop in IT companies hiring activity means for attrition levels

What a drop in IT companies hiring activity means for attrition levels

Hiring in information technology (IT) sector has dropped for second straight month in November, according to a job portal index, which tracks job positings for different sectors on a monthly basis. The Naukri JobSpeak index reported the second straight month of decline in postings from IT services companies in November. As per the index, hiring activity in the sector is down 26% from the all-time high activity seen in September this year and is at the lowest level in seven months . According to Motilal Oswal, historically, IT attrition activity has had a high correlation with the JobSpeak index and hence, any moderation in the index level is considered to be an important lead indicator of employee movement within the IT Services industry. While we have data on hiring moderation for only two months, the sharp deterioration indicates either the peaking or easing of the decade-high attrition in the IT Services industry, a Motilal Oswal Financial Services report said. Lower attrition might reduce pressure on operating margins as hiring and training of new employees incurs huge costs. It could also materially impact the profitability of IT services companies – as an increase in attrition has resulted in a sharp jump in both hiring activity as well as cost per employee across the industry. Indian IT companies announced their plans to hire freshers in record numbers to deal with the high attrition rates. The improved demand environment is creating opportunities for technology professionals, leading to a war for talent. On a trailing 12-month basis, the attrition rate of Tata Consultancy Services Ltd (TCS), lowest among peers, still increased to 11.9% in the September quarter from 8.6% in the preceding quarter. As many as 43,000 freshers joined India’s largest IT services firm TCS in the first half of this year, the highest ever on-boarded in the first six months. TCS, which has already crossed its hiring target, is expected to take in 35,000 freshers in the second half of FY22. Bengaluru-based Infosys Ltd has upped its hiring target for FY22 to 45,000 from the earlier projection of 35,000 on the back of high demand and attrition. For the September quarter, the attrition rate of Infosys rose to 20.1% from 13.9% in the preceding quarter. Wipro Ltd hired 8,150 freshers during the September quarter, higher than the earlier target of 6,000. The company said it will hire more than 12,000 freshers in the current financial year and will roll out 30,000 offers for freshers to join in FY23. Wipro’s attrition rate for the second quarter rose to 20.5% from 15.5% in the first quarter. For Noida-based HCL Technologies Ltd, the attrition rate rose to 15.7% in the second quarter from 11.8% in the June quarter. To deal with this, it has hired 5,779 freshers in the September quarter and set a target of hiring 30,000 freshers by the second quarter of FY23. Attrition in IT services companies has triggered a global panic among customers as it may slow down their digital transformation journey, according to analysts. Hence, any normalization in attrition in the sector could be taken positively by investors and result in a further re-rating of the stocks, the brokerage firm said in its report. Download.

economy 2021-12-09 Livemint