IT firms’ staff costs rise on rising lateral, billable recruitment

Analysts say the attrition rate indicates that companies are losing talent and are being forced to hire executives for specialized roles at higher salaries. He added that high attrition in the industry will continue as it remains a poaching ground for startups, and companies will need to replace them with a billable workforce.

“with top up more than wage bill 10,000 crore, the conglomerate (Wipro, Infosys, Tata Consultancy and HCL Tech) has ramped up talent spending on replacement and retention, adding over 83,000 employees. “High churn in mid- to mid-senior roles has necessitated replacement at a high cost,” said Kamal Karanth, co-founder of Xpheno, which specializes in technology and startup hiring.

According to Mint analysis, all four companies reported a decline in employee costs as a share of revenue in the fiscal third quarter. On average, salary cost as a share of revenue fell from 56.2% in the September quarter to 55.1% in the December quarter.

Bengaluru-based Wipro posted the biggest decline from 60.9% to 58.6% during the period. Wage costs fell from 53.2% to 52.9% for Infosys, and from 56.1% to 55.8% for TCS. HCL’s wage cost fell from 54.6% to 53% during this period.

However, despite the sequential decline, salary cost as a share of revenue is still higher than in the same quarter a year ago. In fact, salary bills account for the largest share of revenue in the manpower-intensive IT sector.

Total employee cost includes benefits, provident fund, insurance, as well as salary.

“Efforts by attrition to rein in attrition and retain talent have seen compensation costs rise for top talent levels. The wage bill spike is a result of the combined effect of higher replacement volumes on higher costs and higher attrition rates Karanth said.

Over the past year and a half, the IT industry has witnessed mercurial HR trends – a hiring frenzy where counter offers and out-of-turn promotions dominated the scene, followed by challenges posed by a global recession. Its impact is seen in the increase in attrition rates and recent recruitment initiatives.

Analysts said it was the first time in more than a year that the attrition rate, or share of employees, for all four companies fell below 25% sequentially.

However, Saurabh Govil, Wipro’s chief human resources officer, cautioned that although the attrition rate has come down and is expected to fall further, there are some areas where the gap between demand and supply of skilled talent remains .

“There are areas of skill that continue to see a skills gap. Govil said people with certain expertise will remain in demand.

Infosys Chief Financial Officer Nilanjan Roy said in a statement, “The headcount has declined significantly during the quarter and is expected to decline further in the near future.”

TCS and Wipro have reported decline in headcount for the first time in 10 quarters. Infosys reported its weakest growth in headcount in the last nine quarters at 0.5%, while HCL’s employee growth was also weak at 1.3% but the best among its peers.