Wage cost of IT firms eases
Mint analysis, Wipro, which had the highest wage burden among Indian IT companies, spent 60.5% of revenue on employee benefits, down from 61.4% in Q1FY24 and 61.5% in Q2FY24. Tata Consultancy Services (TCS) spent 57.3% of revenue for employees in Q3, compared to 58.8% in Q2,and 59.2% in the first quarter of the current fiscal year. HCL Technologies allocated 55.8% to employee costs in Q3, down from 57.2% in Q2 and 57.1% in Q1, while for Infosys it was at 53.2% in Q3, declining from 53.8% in Q2 and 54.3% in Q1.
However, there is room for improvement as the current figures exceed those from a year ago. To put it in perspective, a year back, cost as a share of revenue for TCS, Infosys, Wipro and HCL Tech was at 55.8%, 52.9%, 58.6% and 53%, respectively. That said, wage costs typically surpasses 60% of total expenses for IT services firms heavily reliant on manpower.
Recruiters expect a further reduction in employee costs for IT services companies, with the likes of Infosys and Wipro tightening their campus hiring initiatives. However, the costs are higher than the year-ago period as the pool of skilled professionals available in the market are expensive, the experts said. “Some businesses in these companies have delayed appraisals.
Recruiting talent with the relevant AI prowess and upskilling existing employees to make them client-ready is far more expensive than hiring professionals with generic skills from the market," Vijay Sivaram, chief executive, Quess IT Staffing, said. Infosys, for instance, implemented salary hike last year in November instead of its typical June cycle. The fall in wage costs has also been accompanied by one of the highest net reduction in staff strength in the December quarter.
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