Attrition poised to fall as tech players loosen purse strings

Written by Debojyoti Ghosh | Debojyoti Ghosh | P P Thimmaya | Bangalore | Updated: Jun 20 2013, 07:33am hrs
High attrition rates, which have been a major concern for the Indian IT-services firms, may now ease up as employers are going the extra mile to retain their edge in an industry driven by talent. The market-leading increments at Infosys and Wipro last week means companies are pushing the recharge button despite low visibility of the business climate.

The wage hike announced by the top-tier IT firms was contrary to industry expectations that pointed either to a delay in hikes or low increments for FY14. Staffing companies feel that the high attrition rates across the sector might decline in the next two quarters as the recent increments comes as a respite to employees, who for long have enjoyed double-digit salary hikes every year, sometimes even a bi-annual hike. But the situation took a drastic turn since the 2008 financial downturn. Since then, employees have either seen a single-digit hike or nothing at all.

Sangeeta Lala, senior vice-president, sourcing, TeamLease Services points out that the hikes announced recently were in reaction to the high-attrition rates that the companies have been struggling with over the last several quarters. Typically attrition is higher during the first six months of the year because of the hike cycle and the new financial year. From the middle of the year it gradually tends to slow down. I don't see attrition scaling up in the next few months. It should rather come down or remain flat, said Lala.

Infosys, India's second-largest IT services firm, recorded the highest attrition rate among peers at 16% for FY13 on last twelve-months trailing (LTM) basis. For TCS, attrition stood at 10.6% and Wipro at 13.7% on a LTM basis.

Kelly Services India MD Kamal Karanth said the salary increases by Infosys and Wipro would help them once again in becoming one of those preferred employers. The salary increase also means that normalcy has been restored.

Commenting on Infosys wage hike, a Motilal Oswal Securities report said, Low utilisation levels and tepid growth guidance would have suggested that higher attrition may not be entirely unwelcome, but the companys decision to revert to wage increments last year in October after holding back wage hikes at the beginning of FY13, and now again in less than 12 months, would suggest otherwise.Though the IT employment market has not been buoyant, employees were able to find lucrative opportunities in captives, which are understood to be hiring in reasonable numbers.

Last week, Infosys announced an average wage increase of 8% for employees based in India and 3% for employees in other geographies, effective July 1. For the global sales team, the average increase of 8% was effective May 1.

Infosys' salary hike was at the top-end of the industry, which has given an average wage increment of about 7% to employees in India. We see the industry-leading wage hike helping the company regain the losing confidence of employees. Moreover, it would help them retain and attract good talent, Shashi Bhusan, analyst with Prabhudas Lilladher, in a report said.

TCS, country's largest IT-services firm dolled out hikes in the range of 5-10% for employees in India, while Wipro announced an average hike of 6-8% for people in India. However, in FY13, the sector broadly gave salary increases of 6-8%.