Hiring by IT cos down 96% in Q3 compared to preceding 7 quarters even as attrition cools

• Recessionary concerns have led to Indian IT companies exercising caution, with hiring slowing down drastically in Q3 FY23.
  
• India’s top four IT companies TCS, Infosys, HCL Tech and Wipro saw a net addition of just 1,940 employees in Q3, the lowest in the last eight quarters.
  
• TCS, India’s largest IT services company reported its first headcount decline in the last ten quarters, but denied that it is an indicator of a blip.
  

India’s IT services companies are going slow on hiring, even as attrition rates have cooled down amid concerns of a looming recession in their key markets, the United States of America and Europe.

Collectively India’s top four IT companies TCS, Infosys, HCL Tech and Wipro saw a net addition of just 1,940 employees in Q3 FY23, the lowest in the last eight quarters.

In the preceding seven quarters, these four IT companies had added 53,047 employees on an average. In comparison, hiring in Q3 is down by over 96%.

While the drastic slowdown in hiring stands out, elevated expectations of salaries have also come down. “It is definitely helping out because more so on the elevated expectations of salaries and the backfilling retention expenses that have come down is definitely helping on the margin side,” said Sameer Seksaria, TCS’ chief financial officer, during the company’s earnings call.

TCS reports its first headcount decline in 10 quarters, says it was ‘planned’

In Q3, India’s largest IT company, TCS reported a decline in headcount for the first time in the last ten quarters. The company’s chief human resources officer, Milind Lakkad, however, said that this was a “planned” reduction rather than an indicator of a blip.

Lakkad tried to explain the reduction in headcount, saying, “That does not indicate anything on the demand side. Demand is high, we are just operating very efficiently right now.”

TCS was joined by Wipro in terms of headcount reduction. The Bengaluru-based company reported a decline of 435 employees from its roster, a quarter after reporting the slowest net hiring in the last eight quarters.

Only Infosys and HCL Tech reported a net addition to their headcount. Even for Infosys, its employee addition was the slowest in the last eight quarters. HCL Tech, on the other hand, witnessed a 65% sequential decline in hiring during the quarter.

In FY22, these four IT companies hired over 60,000 employees every quarter on an average. Hiring witnessed a continued slowdown in FY23, with Q2 witnessing a sharp decline to 28,836 net hires.

Due to the headcount reduction in Q3, TCS and Wipro lead in terms of hiring reductions, followed by Infosys and HCL Tech.


Source: Company reports

Attrition rates continue to cool down

Elevated attrition rates emerged as one of the major headaches for Indian IT companies since the beginning of FY22. Infosys, the second largest Indian IT company, reported a peak attrition rate of 28.4% in Q1 FY23.

However, in Q3, all the four IT companies have reported a reduction in attrition rates between 20-280 basis points. Hundred basis points make up one percent.

Infosys, which has had the highest attrition rates in the previous four quarters, reported the biggest decline at 280 basis points. However, it still continues to have the highest attrition rates, while Wipro has the lowest amongst the four companies.

IT companies exercise caution

Recessionary concerns and a resulting lack in clarity on demand has Indian IT companies on a “wait and watch” mode. Heads of the two largest companies, TCS and Infosys, struck a cautionary note during the Q3 earnings.

“Europe is a problem and the US whether it's a problem or not, time will tell. The overall demand scenario has not changed significantly and we will know more in a few more months. Everyone went into December being very cautious,” said TCS CEO Rajesh Gopinathan, but added that the company is positive on the US market.

Gopinathan’s counterpart at Infosys, Salil Parekh said there are signs of a slowing global economy despite the company beating analyst expectations. “While we are encouraged by the immense confidence and trust our clients have in us, the signs around are showing a slowing global economy,” Parekh said.

He also outlined the segments most impacted by recessionary concerns, which includes mortgages and investment banking in the financial services industry, telco, high-tech, and retail. These signs, he said, are leading to delays in decision making and spending uncertainty.

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