IT attrition to remain above 20% in upcoming quarters

The HR industry is not laying a bet on attrition in IT services sector to come down significantly despite an uncertain demand scenario due to growing recessions concern in key markets in the US and Europe. Analysts estimate that the overall attrition numbers will hover around 20% for most IT companies, which is among the highest levels so far.

“Attrition in the IT sector is estimated to hover around 20% in the near future. The macroeconomic conditions and other key performance indicators will also play a large part in deciding the attrition rates and the contribution toward the overall last twelve months (LTM),” said A.R. Ramesh, director of digital business solutions, professional staffing and international engagement, Adecco.

Adecco’s comments come on the back of Tata Consultancy Services (TCS ) clocking an attrition of 21.5% (LTM) in the July-September (Q2) quarter, up from 19.7% in the April-June (Q1) period. TCS’s chief human resources officer Milind Lakkad said on Monday that “attrition has peaked in Q2 and should see it taper down from this point, while compensation expectations of experienced professionals moderate”.

TCS was the first of the IT service firms to announce their quarterly results on Monday. Wipro and Infosys, who had their attrition of 23.3% and 28.4% in the fiscal first quarter will announce their September end quarter results on Wednesday and Thursday respectively.

The tech sector, which had seen almost a year of high salaries, counter offers and an employee’s market as companies across sectors digitized their businesses and adopted cloud-based technology is seeing a petering of the frenzy.

“Attrition rates of IT service bellwethers, for the quarter ending September, will end as high as the previous quarter, if not higher. While hiring funnels in IT have shrunk and slowed down over Q2, enterprises have honoured offers made in Q1 to lateral talent,” said Kamal Karanth co-founder of Xpheno, which specialises in tech hiring.

Karanth pointed out that attrition in the sector will be “largely driven” by exit spillovers from the first quarter since many had to serve a 90-day notice period before leaving a company. Employees who accepted offers from mid-Q1 to early Q2, were exiting over Q2. “Hence irrespective of the hiring slowdown in Q2, employee exits and attrition rates remained high,” he told Mint.

But going ahead, the overall exit numbers will continue to remain high, as the demand for digitally skilled talent between 4-10 years of work experience in global inhouse captives or global capability centres is constant. The candidates aare getting a 35% hike when changing jobs.

Tech service firms have tried retention measures via promotions, skillset training, variable bonuses but an immediate impact may still not be felt.
“With cautious shifting of jobs, attrition will come down but for the next 2 quarters, it will hover around 18-20% mark as hopping on and off jobs decline. But it will not go back to the pre-pandemic levels, “ said Akshara Bassi, an analyst for global cloud and servers market at Counterpoint Research.