Tech Inc spares the axe to ready staff for future as benches fill up

Written by P P Thimmaya | Debojyoti Ghosh | Debojyoti Ghosh | Bangalore | Updated: Jan 7 2013, 18:10pm hrs
The $100-billion Indian information technology industry has seen a drop in business volume and there may even be some missed growth targets this fiscal, but the countrys top-tier IT firms are still wary of any kind of mass retrenchment. Recruitment consultants say organisations are now more discreet in letting go of their non-performing staff in bulk, preferring to restrict pink slips as the negative publicity can linger for years.

Having been caught off-guard by the severe economic downturn in 2008 and 2009, many Indian IT companies ended up with large bench strengths and resorted to layoffs with no back-up strategy. But this time, organisations are engaging much more in reskilling many of their employees to be in line with market requirements.

Bulk layoff is a rarity and the last resort for any company. Currently layoffs are definitely happening across companies, but more selective than last year. Companies do not admit when they let people go. They try to keep it under wraps, says Ronesh Puri, managing director, Executive Access, a head-hunting firm.

Sangeeta Lala, senior vice-president, sourcing, TeamLease Services, points out that there is no mass layoff happening yet. We have not seen IT companies taking steps to lay off employees in large numbers. However, it is a difficult time as the visibility on future business is very low. During tough times companies become much stricter and far less patient. Difficult decisions are taken sooner. If earlier a quarter was allotted to employees who were not performing, now it is just a month, she says.

The top four Indian IT firms Tata Consultancy Services, Infosys, Wipro and HCL Technologies together account for a combined workforce of close to 600,000. With business appearing thin over the last one year, the IT services sector has seen an increase in the number of non-billable employees warming their chairs.

People on the bench, who remain unproductive, are a pointer to the volume of work coming into a company.

During the quarter ended September, the average utilisation level of the leading players in the sector stood at around75%, with the rest largely being on the bench.

However, this is also the time when large Indian IT companies are engaged in keeping their employees future ready. Suparna Rao, co-founder and CEO, Excellence4u, an employee assessment firm, says many of the IT biggies are now focused on reskilling and retooling their employees in line with current business requirements and future demands.

Rao says many companies are now identifying the gaps in their competencies and are working on how they can reskill the non-billable employees to fit into these new areas. There could be some pruning of people when they do not meet the competency requirements, she adds.

Staffing companies say the hiring scene in the IT sector is expected to be flat or could see a further dip during the January-March period. Amitabh Das, CEO, Vati Consulting, a recruitment firm, says that in the last 18 months Indian IT firms have been very cautious in their hiring and there is unlikely to be any kind of change.

We expect hiring in the current quarter (January-March) to be 10-15% lower than Q2 and Q3. Mostly, the hiring during this period will be at the mid levels, says Lala of TeamLease.

This tepid hiring has also witnessed attrition rates at top-tier IT companies dropping to their lowest levels during the quarter ended September as many employees have become risk averse and opportunities having dried up to an extent over the past couple of quarters.

During the July-September stretch, attrition at TCS, the countrys largest IT firm, was at 10.2%, its lowest in several quarters. For Wipro, there has been an improvement in attrition, which was down to 14.6% from 15.6% in the preceding June quarter. On a last twelve-months trailing (LTM) basis, Infosys attrition fell to15% from 15.6%, year-on-year, while for HCL Technologies it stood at 13.6% from 14% sequentially.

Industry observers feel that the lower level of attrition is likely to continue for some more time and any pick-up in demand would happen only after two quarters.