IT employee costs touch a multi-year high

livemint.com:

Mumbai/New Delhi: High employee expenses have prompted information technology (IT) companies to defer onboarding and promotions to initiate strict cost control measures. A weak deal pipeline and poor visibility for the next couple of quarters has compelled Tata Consultancy Services (TCS), HCL Technologies and Wipro to set minimal hiring targets. A Mint analysis found that in the first quarter of the financial year, wage costs as a share of revenue increased for all three companies to a record high in the last at least five years.

TCS had the highest burden of employee costs as a share of revenue among the three IT giants, because revenue had consistently grown slower than wage costs. Of the last eight quarters, year-on-year wage costs growth outpaced revenue growth five times for TCS, seven times for HCL, and all eight times for Wipro. “Q1 bellwether results are emerging largely bittersweet for tech talent.

Low-to-no net headcount additions are bad news for freshers and entry-level talent," said Kamal Karanth, co-founder of Xpheno, a tech recruitment firm. Growth in employee costs despite the drop in attrition is a sign that IT firms are looking at lateral hires to meet niche demands, a move that is proving to be expensive. In the April-June quarter, the attrition rate for the three companies continued to fall, maintaining the trend for over 4-5 quarters.

While TCS’ attrition rate stood at 17.8% versus 20.1% in March quarter; HCL’s attrition declined from 19.5% to 16.3% sequentially. Wipro’s attrition dipped from 19.2% to 17.3% in the Q1Fy24. “We’ve been able to streamline operations, reduce number of overheads, just remove some of the layers of unproductivity," said Wipro’s chief executive officer Thierry Delaporte on