IT companies: Caution amid rising job losses, margin pressure, HR cost surcharge

Experts in the field say the war for IT talent may continue until the industry-ready manpower pool is substantially expanded.

with IT companies Forced to fill vacancies to meet incoming demand, and for non-tech firms to meet the needs of their digital-savvy consumers for tech talent, market watchers believe That employee-related issues will keep the IT industry on the razor’s edge.

Consider this. Net hiring by the top three IT companies – Tata Consultancy Services (TCS), Infosys and Wipro crossed the 50,000 mark in the June quarter. There has been no significant shortfall in the target setting for the full fiscal so far as the industry claims tech demand in the US and Europe has so far remained despite fears of a global slowdown.

Overall, six million (60 lakh) new tech jobs are expected to be created over the next five years, according to TeamLease Digital CEO Sunil C.

While the hiring spree has cheered tech professionals, lines of concern among IT employers have begun to emerge at unprecedented levels, fueled by rising manpower costs, and moonlight (techs taking side gigs to work on more than one job at a time). experts) on such issues. ,

The recent scale back in variable pay by companies such as Wipro and Infosys reflects the extent of pressure on margins. And murmurs about a potential slowdown in global trade momentum are bound to exacerbate the industry’s woes.

“In the short term, IT companies will continue to see margin pressure as there is cost surcharge while there is no increase in deal structure. Once companies get the talent strategy right and execute cost optimization projects, they will be able to improve margins, According to Sunil of TeamLease Digital.

Companies may try to get new projects and deal with renovations at a better price by incorporating factors such as inflation and cost escalation, but this may prove easier.

Infosys, India’s second largest IT services company, led the hiring spree with a net addition of 21,171 professionals in the June quarter, as compared to 27.7 per cent in the March 2022 quarter and 13.9 per cent a year ago. Gone.

Higher employee benefits expense, sub-contracting costs and travel expenses pushed up the overall cost for the Bengaluru-headquartered firm in the June quarter.

The hike in compensation impacted margins by 160 basis points, and utilization declined due to the impact of the arrival of new freshers, though Infosys said it continues to optimize various cost levers to increase efficiency in operations.

With an operating margin of around 20 per cent in the first quarter of FY13, Infosys has maintained margin guidance at 21-23 per cent for the full year, but has clearly clarified that with the escalating cost environment, It will be on the lower end. Margin Outlook.

Recently, Infosys has slashed the average variable pay of employees to around 70 per cent for the June quarter, amid tight margins and higher employee costs.

Infosys isn’t the only company that is the most troubled in terms of variable payouts.

Due to pressure on margins, Wipro has put on hold variable pay of employees. The company’s C-suite level managers will get no share of the variable pay, while employees ranging from freshers to team leaders will get 70 per cent of the total variable pay.

Net recruitment for Wipro for the June quarter was 15,446 professionals, compared to 23.8 per cent in the March quarter and 15.5 per cent a year ago, with a job dropout rate of 23.3 per cent.

As IT companies are fighting a formidable battle on the human resource front, issues like ‘moonlight’ in the tech industry have also ignited a new debate.

Wipro chairman Rishad Premji recently took to Twitter to highlight the issue, saying: “There’s a lot of talk about people moonlighting in the tech industry. It’s hoax – plain and simple.”

TeamLease Digital’s Sunil says the war for technical skills or technical talent is not limited to just within IT companies, but also among telecommunications, engineering, retail, healthcare and others that have launched major digitization drives. .

He revealed, “There is a huge opportunity opening up in non-native IT companies as well and we are seeing month-on-month growth in technical requirements in the non-IT space.”

The net recruitment for TCS stood at 14,136 professionals during the June quarter of the current financial year, with layoffs increasing from 17.4 per cent in the previous quarter and 8.6 per cent in the same period last year to 19.7 per cent.

According to Anurag Malik, Partner, People Advisory Services, EY India, the hiring spree in India over the past few quarters has been driven by the high demand for digital skills across sectors to navigate the post-pandemic through rapid technology adoption.

Deloitte India director Vamsi Karawadi said that from an employee perspective is “definitely a positive” and there is a recognition of talent capabilities and skills in India, it “challenged organizations to redefine their employee value proposition”. Is.”

“Hiring has definitely reached pre-pandemic levels and has even surpassed them in some niche skills,” said Karavadi, reflecting the spike in demand seen in the last 6-8 months.

Malik (EY India) says the solution to the HR challenges in the IT industry is to engage the internal workforce to curb employee turnover, future-proof the workforce through skilling, career advancement opportunities for employees , attracting the right talent and prioritizing learning experiences. as employee welfare.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.

first article