On Wednesday, Tata Consultancy Services (TCS) announced its attrition rate for the second quarter of the fiscal year 2024, showing a substantial decline from the previous quarter. TCS's attrition rate decreased to 14.9 per cent from 17.8 per cent, indicating improved employee retention despite the recessionary challenges in the Western markets. On the heels of TCS, Infosys and HCL Technologies (HCLTech) also unveiled their Q2 results on Thursday, showing similar positive trends in attrition rates.
Infosys, the Bangalore-based IT giant, reported a decline in attrition to 14.6 percent from 17.3 percent in the previous quarter. Meanwhile, HCLTech saw a significant reduction in attrition, with the rate standing at 14.2 percent, down from 23.8 percent in the second quarter of FY2023.
The declining attrition rates at these prominent IT companies in Q2 FY24 are being viewed as a positive sign. Lower attrition rates are often indicative of increased employee satisfaction and a company's ability to retain talent. However, the simultaneous drop in employee count and slower hiring suggests that these IT giants are preparing for potential challenges in the remainder of FY24, as the industry continues to deal with continued low discretionary spending and sluggish decision-making in deals.
In Q2 FY24, Infosys experienced a net staff headcount decrease of 7,530 during the September quarter, bringing the total workforce to 3,28,764. Notably, employee utilisation witnessed an improvement, reaching 80.4 percent in the September quarter, up from 78.9 percent in the June quarter. HCLTech reported a total workforce of 221,139, with a net addition of -2,299 employees, while welcoming 3,630 freshers.
Lower attrition rates are often indicative of increased employee satisfaction and a company's ability to retain talent. However, the simultaneous drop in employee count and slower hiring suggests that these IT giants are preparing for potential challenges in the remainder of FY24
Similarly, TCS reported a decrease in its workforce, with a net reduction of 6,333 employees. As of 30 September, the company's total employee headcount was 6,08,985, down from 6,15,318 during the June quarter.
Industry experts are now speculating about how these IT companies, which have reported robust quarterly order books for Q2, will manage to execute projects without scaling up their workforce. Nevertheless, the companies themselves remain optimistic, as they plan to leverage their existing talent bench and maintain steady hiring to navigate the uncertain economic landscape in the coming months.
Sunil Chemmankotil, CEO, TeamLease Digital said, “There was a slowdown witnessed in Q2 last year and seemed like a passing shower with things expected to improve this year, as at first the higher inflation looks like knee-jerk. However, with the tech companies' Q2 FY24 results the outcome signifies a negative headcount addition for most of the IT services.”
Chemmankotil stressed that IT services contribute to about 70 per cent of the demand, only 30 per cent is contributed by Global Capability Centres (GCC) products and internet companies.
"The requirements that used to flow to IT staffing companies dropped by almost 70 per cent at one point of time in the last quarter (Q1 FY24); it just moved up to 50 per cent." - Sunil Chemmankotil, CEO, TeamLease Digital
Speaking about the recruitment pattern, Chemmankotil pointed out that TeamLease Digital, a company that specialises in staffing & solutions across IT, is currently at -50 per cent to the level similar to pre-Covid. “Currently, the demand is 50 per cent less than the kind of demand seen before. The only change now is that while IT services have dropped down, the requirement is cut by a huge 80 per cent.”
On similar lines, Yeshab Giri, Chief Commercial Officer, Staffing and Randstad Technologies, Randstad India said that the Q2 results of some of the IT majors indicate a conservative approach to hiring. “Although we expect the hiring intent to be somewhat subdued due to workforce restructuring, increased investment in automation and continued caution on discretionary spending, this is a temporary situation and not a cause for concern.”
But Giri anticipated a possible rebound in hiring over the upcoming quarters as the global demand stabilises, opening up newer avenues of demand.
Q2 FY24 commentary on hiring by top IT companies including TCS, Infosys and HCLtech, suggests subdued campus hiring in FY24
Talking about the rising geopolitical issues, Amandeep Kaur, founder and CEO, Phoenix TalentX Branding said, “Issues like the Israel-Hamas war, forecast uncertainty in global technological demand.” She said this would make the US and Europe decrease the appetite for business expansion. AI-led business automation or ChatGPT-led business restructuring will further contribute to a downtrend in hiring especially in the IT sector.
Kaur emphasised that this would affect campus placements as the big IT companies have reduced new workforce addition by 70-90 per cent in 2023 itself.