Recession Vs attrition

Retaining the right talent has become a boardroom discussion for many companies, whether it is big or small. The two big industries which have experienced high attrition are big IT companies and insurance companies. The post-pandemic period has actually accentuated the problem of attrition further.

Many feel that the high number of attritions was partly due to the seasonality impact when junior employees opt for higher studies as well as supply-side constraints. Yet, there are global companies with an attrition of less than 4% for many years.

A report says, Attrition levels which are at an all-time high have unnerved domestic IT services companies as they struggle to retain talent. The attrition rate at Infosys has grown 12% to 27.7% in Q4 of FY22 from a year earlier while at TCS, the attrition rate rose 10% to 17.4% during the same period. In other words, nearly 80,000 employees quit Infosys between January and March this year whereas around 1 lakh resigned from TCS, during the same quarter.

Indian IT companies have spent up to 62% of their revenues towards salaries and wages of their employees, with the total salary bill for FY22 coming in at ₹3 lakh crore. All the three giants, TCS, Infosys and Wipro reported a sequential decline in profits, blaming wage hikes and increased travel costs, among other things.

The management added that attrition will see some moderation only in the second half of this financial year. Probably, that is the immediate short-term view on attrition but from a medium-to-long term, it is expected that both the supply side as well as the demand side is easing up. This is in terms of talent coming from outside of the immediate industry system and that should play into moderation.

There is a growing concern among the Indian IT companies on how to bring attrition rates back under control, but it is critical for them to improve this especially at a time when recessionary concerns have started having an impact on their top as well as bottom lines. Experts say the salary hikes for job switches to normalise as companies see slowdown in attrition.

The fact is the global slowdown is forcing companies to balance hiring against rising expenses. Companies are now focusing on controlling high wage bills, reducing retention costs, improving utilization amid a widespread fear of recession across key geographies like the United States and Europe.

S Mohini Ratna, Editor, VARINDIA