Hiring in the IT sector plunges by 66% in FY23
Business Insider India
- With growth outlook clouded by growing recessionary concerns, Indian IT majors have gone slow on hiring in FY23.
- Amongst the Tier 1 IT companies TCS, Infosys, HCL Tech and Wipro, net employee addition fell by 66% in FY23 when compared to FY22.
- These four companies also reported their first cumulative reduction in headcount in the last two financial years, with the total headcount falling by 939 employees in Q4.
AdvertisementIndian IT companies have significantly slowed down the pace of hiring in FY23 as concerns of an economic recession clouded sentiments in their key markets, the US and Europe.
These concerns resulted in a decline of 66% in hiring by Indian IT majors TCS, Infosys, HCL Tech and Wipro, with a net addition of just 82,679 employees in FY23, compared to 2.43 lakh employees they added in FY22.
The March quarter was also the first instance in the last eight quarters of a decline in net hiring by these IT companies, with a decline of 939 employees cumulatively amongst these companies. In sharp contrast, their average net addition of employees stood at 46,697 in the preceding seven quarters.
Weak demand outlook forces companies to rethink hiring
Weak demand outlook has led to companies focusing on increasing the utilisation levels of their existing base of employees. For instance, weaker-than-expected recovery in key markets like North America has poured cold water on the hopes of IT major TCS.
“Last quarter, we expected North America to recover through the start of the year meaningfully. This recovery has obviously not materialised and turned out to be more negative than we had expected,” TCS’ outgoing CEO Rajesh Gopinathan said in a post-earnings conference call, after the company reported its slowest constant currency revenue growth in 11 quarters.
TCS’ peer Infosys reported “unplanned project ramp downs” and delays in decision making as one of the reasons for missing its own FY23 revenue guidance.
Key sectors like banking, financial services and insurance (BFSI), which is a major contributor to the top and bottom lines of Indian IT companies, has faced headwinds in the US, especially after the collapse of banks like Silicon Valley Bank and First Republic, among others.
The BFSI sector alone accounted for over half of TCS’ net profit in FY23, and disruptions in this sector have spilled over into others which resulted in a cut in discretionary spending by TCS’ clients.
“Clients deferred newer initiatives which were not critical. In some cases, [they] completely halted discretionary projects,” said Gopinathan.
AdvertisementAs a result, TCS’ headcount increased by only 22,600 employees in FY23, down from 1.04 lakh in FY22. Instead, Infosys emerged on the top, with a net addition of 29,219 employees during the year.
In percentage terms, TCS’ net hiring fell by 78% in FY23, while Wipro reported a 70% decline. HCL Tech came in third with a decline of 57% reported a 46% fall.
Of all the four companies, only HCL Tech reported a year-on-year as well as sequential increase in employee additions during Q4.
In FY22, these IT companies hired 60,815 employees every quarter on average. This number fell to 20,670 in FY23.
|Company||FY23 net hires||FY22 net hires||Change|
AdvertisementSource: Company reports
Attrition rates continue to cool down
After emerging as a major headache for Indian IT companies, attrition rates have continued to cool down in Q4. Infosys, the second largest Indian IT company, reported a peak attrition rate of 28.4% in Q1 FY23.
In Q4, all the four IT companies reported a decline in attrition rates in the range of 120 to 340 basis points, significantly better than the Q3 range of 20 to 280 basis points. Hundred basis points make up one percent.
Infosys reported the biggest decline at 340 basis points, but continued to have the highest attrition rates amongst the four companies at 20.9%, followed by TCS at 20.1%.
Overall, the sentiment in the Indian IT sector remains sombre, with Infosys guiding for a much slower revenue growth of 4-7% in FY24 – this is the first time since FY16 that the company has guided for a single-digit revenue growth. HCL Tech guided for a constant currency revenue growth of 6-8% in FY24, while Wipro said its IT services revenue could decline between 1-3% in the June 2023 quarter.
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