Why Infosys, TCS, Wipro, and other Indian IT giants are facing record-high attrition rates
Tata Consultancy Services (TCS), Infosys, and Wipro raised their net hirings to over 50,000 in the first quarter of the financial year 2022 as a result of high attrition, as per their financial results.
Record-high attrition rates are exacerbating the Indian IT industry’s woes, as companies face cost overruns and margin pressures. According to their financial results, Tata Consultancy Services (TCS), Infosys, and Wipro, India’s top three IT behemoths, increased their net hirings to over 50,000 in the first quarter of the fiscal year 2022 due to high attrition.
What are the current attrition rates in the Indian IT sector?
Attrition rate refers to the metric used to measure the loss of employees over time. Infosys’ attrition rate stood at 28.4 per cent, the highest among Indian IT bellwethers, in the first quarter of the financial year 2022. Wipro came in next with an attrition rate of 23.3 per cent while the attrition rate at Tech Mahindra was reported at 22 per cent. CP Gurnani, Managing Director and Chief Executive Officer of Tech Mahindra reasoned that the high attrition rates could be attributed to the rapid expansions in the industry. He said, “In general when an industry goes through a rapid surge, there is shock with attrition rate running at 23-24%, I think that shock stage is now coming down.”
TCS’ attrition rate spiked to 19.7 per cent, a rise of 2.3 per cent from the previous quarter, albeit lesser than its peers. Rajesh Gopinathan, CEO of the largest Indian IT company TCS, pointed out after the quarterly results announcement that the firm’s attrition rate has not come down yet, but might do so in the coming quarters. He said, “On an absolute basis it (attrition rate) is continuing to increase though on a percentage basis it is starting to flatten and that may continue into part of Q2 also.”
Why do employees switch jobs so often in the Indian IT sector?
Based on numbers alone, attrition rates in Indian IT companies are higher than in other industries.
An IT employee in Bengaluru explained to news agency why he believes Indian techies change jobs so frequently. “The growth opportunities are very limited if we stay in the same company for more than 1-2 years now,” he said. The growth trajectory at any of the top Indian IT companies is no longer the same as it once was; we now face fierce competition in the industry.”
TV Mohandas Pai, former director at Infosys, also stressed that there is an excess of people working in the Indian IT industry. He told news agency, “There is a surplus of people in the system. All of them want to join the big companies and build a career and get good training.”
Another employee in the IT sector told a news agency that the high attrition rate could be due to higher pay by other multinational corporations in the same sector.
“Why I and most people around me leave Indian IT jobs is because of financially better paying opportunities at MNCs like IBM, Capgemini, Accenture, and so on,” she explained. They pay more for comparable roles.”
Is there a cost associated with attrition at Indian IT companies?
The cost of attrition includes the expense of training a new employee, salary paid in that time frame, and the foregone billings in the training phase, among other expenditures. Pai explained how the cost of attrition adds up for an IT company. He told a news agency, “The cost of attrition is very high. It is $5,000 per person. Let me give you an example, if somebody leaves, you hire someone new, and you have to train them for six months. They are not billable for that time. Moreover, you got to pay a salary for that time as well.”
