With no visibility on future business volumes, the Indian information technology industry is expected to see more non-billable employees warming their seats. According to recruitment firms, employees on the bench have increased by an average of 50% among top-tier IT firms, posing a serious challenge for software services players.
People on the bench, who remain unproductive, is a pointer to the volume of work coming into a company. Typically, IT bigwigs maintain a bench strength of 10% of the total workforce to cover for any unforeseen projects.
?But this has now gone up to 15% in most companies,? says Sangeeta Lala, senior vice-president, sourcing, TeamLease Services. For instance, if a company with 100,000 employees maintains a bench of 10% or 10,000, this would now have increased to 15% or 15,000, which translates to an increase of 50%.
The top four Indian IT majors ? Tata Consultancy Services, Infosys, Wipro and HCL Technologies ? together account for a combined workforce of close to 600,000. During the quarter ended March, the average utilisation level of the leaders in the sector stood at around 75% with the rest largely being on the bench. Moreover, the utilisation rates are expected to fall further.
?We have definitely seen a rise in bench head counts among the IT majors in the country. Previously, people on the bench used to get alternative jobs, but in the current market it has become difficult to get another job easily. So they have no option but to continue till the company actually fires them,? says Ronesh Puri, managing director, Executive Access, a head hunting firm.
Infosys CEO SD Shibulal had earlier told FE that the company had 30,000 people on the bench. Further, the IT major has also announced that it would delay the intake of fresh engineering graduates extending into the next fiscal year.
Staffing companies feel that the major impact of the expanded bench will fall on employees in the category of 0-5 years of experience as they generally form the bulk of this segment. ?IT companies are trying to reduce their bench. To keep the numbers under control, companies are not hiring replacements when employees are leaving. They also put them on projects that people are not keen to pursue and are forced to leave,? says Lala of TeamLease.
Currently many IT firms are also increasing the size of the contract staff. ?Of late, we have seen a rise in contract staffing both among top-tier and mid-sized IT players. Looking at the current business environment, it makes sense to hire people for six months or one year rather than paying salary for life,? adds Lala.
Industry watchers point out that companies are also cautious now while letting go of their employees in bulk and generally do it in batches so as not to attract any kind of negative publicity.
However, some are of the opinion that Indian IT majors have become a lot smarter after going through the experience of financial crisis in 2008 and 2009, which saw them having large bench strengths with no back-up strategy.
Amitabh Das, CEO, Vati Consulting, an HR firm, says that Indian IT majors have now read the signs of worsening economic conditions. The hiring has been muted in the last three to four quarters. ?The companies are better prepared to handle the situation unlike being caught off guard during the 2008-09 period. Past experiences have made them wiser,? he adds.
In a more conducive economic situation, IT companies generally maintained a large buffer of bench employees to quickly deploy them whenever they bagged a new deal. Organisations could also maintain the size because more than half the employees had below five years’ experience, so did not have a large impact on the wage bill.
According to staffing firms, the hiring scene in the IT sector is expected to see a further dip during the July-September period. They expect hiring activity to slow down in Q2, compared to the April-June quarter. A further 5% drop in hiring is expected during the quarter.