IT cos opt for freshers to set off rising costs
Most large and mid-tier companies in both IT services and engineering services companies are taking up freshers in order to control cost and attrition
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Rightsizing Employee Pyramid
- Margins under pressure
- IT firms suffer from rising SG&A expenses
- Wipro onboarded 10,000 fresh engg graduates in Q1
- Mindtree, L&T Tech to hire 4,500 freshers
- TCS, which hired 100,000 fresh engg graduates in FY22, will onboard another 40,000 freshers this fiscal
Bengaluru: Indian IT companies are onboarding fresh engineering graduates at a faster pace in their bids to right size their employee pyramid as cost pressure piles up owing to high attrition and rising selling, general & administrative (SG&A) expenses.
Most large and mid-tier companies in both IT services and engineering services companies are taking up freshers in order to control cost apart from containing attrition.
For instance, Wipro onboarded 10,000 fresh engineering graduates in the first quarter of current financial year. The company reported a fall in its operating margin by 200 basis points sequentially owing to higher travel and facility expenses.
However, company's subcontracting cost remained low as compared to its bigger peers.
"Key positives in Wipro's Q1 performance include stronger growth in headcount relative to peers with fresher hiring momentum (10,000 in Q1FY23 and 30,000 targeted in FY23 and moderation in attrition as well as resilience in sub-contracting relative to peers," HDFC Securities said in a note.
Market leader Tata Consultancy Services (TCS), which hired 100,000 fresh engineering graduates in FY22, also said that it remained on track to onboard another 40,000 freshers this fiscal year.
"We are on track for that and we're progressing well on it (hiring of 40,000 freshers). This quarter reflecting what we already had in the system, we have been a bit lighter on the one which typically has been our long-term trend. Q1 is a lighter quarter for trainee absorption whereas Q2 and Q3 are the primary quarters. Last year, we had gone very aggressive and hired through the year to build up more than 100,000 trainee bench. This year is more than normal. We're progressing well on that 40,000 mark," Rajesh Gopinathan, CEO, TCS, said during earnings call.
Not only tier-I companies, even mid-tier firms have also been onboarding freshers at an aggressive pace despite fears of demand slowdown in some quarters. Mindtree has said that it would onboard 1,500 fresh engineering graduates every quarter with proper training for faster deployment in projects.
Similarly, engineering services firm L&T Technology Services has said that the company would add 3,000 freshers this fiscal, similar to the last fiscal year. However, the management hinted that overall employee addition trend would depend on utilisation level.
Many experts are of the opinion that operating margin of many companies had dropped owing to falling utilisation level. As more people join the system, utilisation level naturally falls for any company. Therefore, an optimum utilisation level with right employee pyramid would be crucial to sustain margin as cost pressure piled up, they said.
