Why IT attrition stays high despite a global slowdown

Hiring freezes and fewer counter-offers have brought the recruitment frenzy in India’s information technology (IT) companies to a halt. Still, attrition in the sector for the October-December period will hover around 20%. Mint explains why:

What’s behind the high attrition?

Corporates worldwide went digital during the pandemic, fuelling demand for IT services. IT companies, in turn, got more hands on deck to service the demand, and later realized they had over-hired. Then came the pressure on balance sheets, leading to involuntary attrition -- Or layoffs. Overall attrition in IT will be 18-20% range in the December quarter, estimates Prasadh M.S., head of workforce research at recruitment firm Xpheno, which tracks the tech sector. Attrition in the second quarter of the fiscal year remained high for the major players: 27.1% for Infosys, 23% for Wipro, 21.5% for TCS, and 23.8% for HCL.

How big are the layoffs and who is impacted?

The junior to middle layers of the IT industry are the most impacted, since during the hiring frenzy, they were the ones to be hired on a mass scale. And many of them got out-of-turn promotions as a retention measure. However, companies are getting more stringent with productivity now with a slowdown and possible recession looming in many advanced economies, said Manu Saigal, director for general staffing at staffing firm Adecco. New entrants in the lower ranks are being terminated as IT firms downsize their reserves—they no longer need the bench strength they did a few months ago.

Who are those leaving voluntarily?

Ironically, the startup sector, which retrenched 17,000-20,000 this year, still attracts middle management employees from IT services. They are lured into joining with steep pay packages and stock options. The IT sector is also losing employees to the captive units of global corporations. Many captives are hiring project managers and tech experts. “There are exits in the year-end and then in March for the IT firms as some follow calendar year for appraisals while others go by the fiscal year,” said Neil Shah, vice president and partner, Counterpoint Technology Market Research.

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