IT staffing firms face slowdown heat

After record hiring of engineers post pandemic, hiring has been drastically down this year. We don’t expect much revival in this fiscal as October-December traditionally has been a weak quarter, a top executive at a multi-national staffing firm tells Bizz Buzz

Recessionary Phase

• Staffing firms face the heat as IT hiring dips
• Hiring is down 50% as compared to last year
• Staffing firms receiving less mandate for recruitment from IT firms
• Firms working as subcons are also witnessing less volume of work

Bengaluru: With IT hiring going down, staffing firms with a focuson technology resources-based hiring are facing a ‘washout year’ kind of situation in FY24 with less likelihood of any revival during the rest of current financial year.

Top executives of staffing firms opined that talent hiring in technology sector is down close to 50 per cent in the current fiscal so far as compared to last year. Such less mandate of hiring from IT firms has been putting immense pressure on staffing firms’ current business, they said.

“After record hiring of engineers post pandemic, hiring has been drastically down this year. Staffing firms are supposed to be resistant to recession. But this notion has been shattered given the massive hiring dip this year. We don’t expect much revival in this fiscal as October-December traditionally has been a weak quarter,” said a top executive of a multi-national staffing firm.

Hiring by nine out of 10 Indian IT companies fell in the July-Septemberquarter, making it the first time when overall headcount has shrunk in 25 years.Top four IT firms- Tata Consultancy Service, Infosys, HCL Tech and Wipro- havecumulatively cut their workforce by about 38,950 employees in the first half of this fiscal.

Meanwhile attrition has come down significantly as employee become cautious in changingjobs amid a tough demand environment.

Against this backdrop, IT firms are focussed more on improving their employee utilisation ratios. Infosys saw 1.5 per cent sequential improvement in its employee utilisation level to80.4 per cent in the September quarter. Employee utilisation level was up 3.8 percent year-on-basis. Similarly, net utilisation level of Wipro excluding trainees has reached a high of 84.5per cent in the September quarter, an improvement of 80 basis points over theprevious quarter.

Moreover, sources in the know said that IT firms are not backfilling vacant positions. That is considered as one of the reasons for low level hiring mandate to staffing firms.

Apart from low mandate for hiring, which is leading to low volume of business; many staffing firms that work as subcontractors are also facing the heat.

“Subcontracting work is also coming down. To save cost and protect margins, IT firms are not outsourcing much work to third-party vendors or subcontractors. However, we see demand picking up from next year onwards as more projects get executed,” said a top executive of an domestic staffing firm.

Notably, some of the global technology giants have laid off staffers in the recruitment departments as hiring slowed down. For instance, Google’s parent company Alphabet has laid off hundreds of employees from its global recruiting team recently.