Revival of demand will determine IT hiring in FY24

Indian IT industry is going through a transition. After the hyper growth witnessed during the pandemic, there was a slowdown because of the economic slump in key markets, including the US and Europe. Most large IT firms are expecting mid-single digit revenue growth rates in the current financial year. This is quite a fall from last fiscal’s double digit top line growth of both large and mid-tier firms. Owing to such a demand slump, Indian IT firms are cautious in adding headcount. Some even saw total headcount falling in the first quarter ended June 2023. India’s largest IT services exporter, Tata Consultancy Services (TCS) saw a marginal addition of 523 employees during the quarter to take its headcount to 6,15,318 by the end of June quarter. HCL Tech’s headcount on a net basis declined by 2,506 employees, bringing its total employee strength to 2,23,438. The decline in headcount was due to a conscious decision by the management to not backfill all attrition, the management said. In case of Wipro, the fall in headcount was sharper than its peers. Wipro’s total employee count dropped by 8,812 from the previous quarter to 2,49,758 at the end of June quarter.

As employee additions halted, attrition has started trending down. Attrition levels of TCS dipped to 17.8 per cent on the last twelve months basis in Q1 of FY24 as compared to 20.1 per cent in the previous quarter. Similarly, Wipro saw sharp fall in its attrition level at 17.3 per cent, a fall of 2.1 per cent as compared to the previous quarter. For HCL Tech, the trend looked similar. Attrition at HCL Tech fell by 320 basis points quarter-on-quarter basis to 16.3 per cent from 19.5 percent reported in the previous quarter.

As pressure on operating margin continues, IT firms are deferring dates of new hires. What used to be seen in the case of freshers has now extended to laterals. Recently, TCS, citing project delays, deferred joining dates of around 200 lateral hires by a quarter. In this context, it can be presumed that hiring in the first half of the current fiscal will be one of the lowest since the pandemic days. This doesn’t augur well for freshers and the engineering colleges’ ecosystem. Moreover, every company is keenly watching the impact of generative AI on hiring. Experts are of the opinion that rising automation through generative AI tools may impact the overall demand for manpower in the IT industry.

Though it remains under the realm of the unknown, IT firms seem to be on a wait and watch mode for now. Similarly, employee utilisation levels have fallen sharply during the pandemic years with entry of lakhs of freshers into the system. Now, companies are keen to improve the employee utilisation levels. Therefore, they are not backfilling vacant positions. While the sentiment remains subdued, most experts are pinning their hopes on a revival in the second half of this fiscal. Hence, the overall hiring trend will hinge on the likely late recovery in demand this fiscal. For now, it is a ‘wait and watch’ situation for the entire industry.