IT attrition rates likely to remain high at 20%

MUMBAI : Attrition rates at information technology (IT) services firms are likely to remain at elevated levels for the near term, considering the recession fears in key markets such as the US and Europe, according to staffing firms. Attrition is at the highest levels, at about 20%, they added.

“Attrition in the IT sector is estimated to hover around 20% in the near future. The macroeconomic conditions and other key performance indicators will play a large part in deciding the attrition rates and the contribution to the overall last 12 months (LTM),” said A.R. Ramesh, director of digital business solutions, professional staffing and international engagement, Adecco.

For instance, Tata Consultancy Services (TCS) reported attrition at 21.5% (LTM) in July-September, up from 19.7% in the first quarter. “ We believe our quarterly annualized attrition has peaked in Q2 and should see it taper down from this point, while compensation expectations of experienced professionals moderate,” TCS’s chief human resources officer Milind Lakkad said on Monday.

TCS was the first to announce the quarterly results. Wipro and Infosys, which clocked 23.3% and 28.4% attrition rates, respectively, in the first quarter, are expected to announce their September quarter results on Wednesday and Thursday.

Tech companies were on a hiring spree for almost a year, offering high salaries and counter offers as companies across sectors digitized their businesses and adopted cloud-based technology. However, a global economic slowdown and fears of a looming recession have put the brakes and have prompted firms to initiate cost-cutting measures.

“Attrition rates of IT service bellwethers for the quarter ended September will end as high as the previous quarter, if not higher. While hiring funnels in IT have shrunk and slowed down over Q2, enterprises have honoured offers made in Q1 to lateral talent,” Kamal Karanth, co-founder of Xpheno, which specializes in tech hiring, said. attrition will be “largely driven” by exit spillovers from the first quarter since many had to serve a 90-day notice period before leaving a firm, Karanth said.

Employees, who accepted offers from mid-Q1 to early Q2, were exiting over Q2. “Hence irrespective of the hiring slowdown in Q2, employee exits and attrition rates remained high,” he added.

However, going ahead, the overall exit numbers will continue to remain high, as demand for digitally-skilled talent with four-10 years of work experience in global in-house captives or global capability centres is constant. The candidates are getting a 35% hike for changing jobs.

Though IT services companies tried to retain talent via promotions, skillset training and variable bonuses, the initiatives may not bear fruit in the near term.

“With the cautious shifting of jobs, attrition will come down, but for the next two quarters, it will hover at 18-20% as hopping on and off jobs decline. But it will not go back to pre-pandemic levels,” said Akshara Bassi, an analyst for global cloud and servers market, Counterpoint Research.

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