“About 18 months ago, 80% of our placements were from the IT sector; now it is 40%,” said Alok Kumar, president of Manpower, a subsidiary of recruitment firm ManpowerGroup. “We have shifted focus and 60% of our permanent placements are now on the back of retail and manufacturing.”
Anshuman Das, chief executive and co-founder of Careernet, a talent solutions provider, said that a middle management position in the top four IT firms takes almost three months to close these days, compared to a month less than two years ago.
“For a job posting in the middle management level of IT sector, there are more than 100 applications of candidates who have more than eight years of work experience,” added Das. About a year and a half ago, Das had to line up 20 candidates at most to close such a position, indicating the lengthy sifting process the firms are conducting.
Other industries’ gain
IT’s loss clearly has been the other industries’ gain. Recruiters say candidates with digital skills are most wanted in retail, manufacturing, core sector companies, EV (electric vehicles) part of the auto business, and in the FMCG (fast-moving consumer goods) industry.
Demand for junior to middle management is seeing the maximum flux taking place. This is because IT firms often get their younger workforce from campuses, and companies from other sectors are now preferring employees with some years of work in the IT sector.
To be sure, job switches remain at a moderate 20-30% and none of the other industries are rolling in high offers.
“The movement is largely from small and mid-sized IT firms, rather than from the more established ones, who are unwilling to change their firms now,” Aditya Narayan Mishra, chief executive of Ciel HR Services, said. “Those fearing retrenchments are in a rush, but IT services companies are in no hurry.”
Ciel HR Services has seen a 12% increase in contract placements in April versus the earlier three months. This indicates that these companies would rather take on people on short-term basis than for permanent roles.
Mishra noted that even global capability centres (GCCs) have slowed down in their mandate closures in most profiles. GCCs are captive offshore development centres of multinational companies.
IT performance
IT sector majors Tata Consultancy Services (TCS), Infosys, and Wipro posted a cumulative full-year decline of 63,759 people in their workforce in FY24.
Employee expenses, which form more than 55-60% of an IT firm’s costs, remain a concern. The trio reported an increase in their employee wage costs as a share of revenue in the March-ended quarter of 2023-24, a Mint analysis of their financial results showed.
For Wipro, which had the highest wage burden among Indian IT companies, 61.4% of the quarterly revenue went on employee benefits in the three months ended March, up from 60.5% in Q3 and 61.5% in Q2. TCS reported a marginal increase from 57.3% in Q3 to 57.4% in Q4, while Infosys allocated 53.8% to employee costs in Q4, up from 53.2% in Q3.
The slow pace of IT vacancies being filled is in turn slowing down the billing opportunity for the recruitment firms, which look at permanent hiring. In permanent recruitments, the HR firm gets a certain percentage of a candidate’s compensation after placement. In temporary staffing, there is a flat fee structure, and the same set of people gets moved from one firm to another once the stipulated period is over.
A drop in attrition rates for the January-March quarter amongst IT companies is another sign of low churn in the sector.
However, there are selective skills that need immediate attention and closure. India’s largest IT services firm, in March offered vendors ₹40,000 per candidate over and above the fees if they manage to make senior candidates join in less than 30 days. Called the ‘Quick Joiner Incentive Plan’, vendors are however cautioned that the money will be recovered if the candidate leaves the organization in six months. The urgency to get experienced employees in programs like Flutter, Windchill, Workday, SAP.