Covid-19 claims contract staff in IT services firms

According to several industry sources in the know, expenses towards deploying contractual staffer, which used to account 10 per cent of the overall billable employee cost at IT firms, has fallen to around 3 per cent. IT firms typically use the contractual workers from staffing solutions providers or subcontractors. 

Employment of contractual software engineers by Indian IT services companies has fallen significantly as the Covid-19 pandemic continues to disrupt businesses globally. 

Most of the IT firms are grappling to manage their growing bench (reserve employees who are not deployed in any revenue-earning projects) owing to cancellations of projects in verticals such as hospitality and aviation, as well as delay in project starts and ramp-ups. 

According to several industry sources in the know, expenses towards deploying contractual staffer, which used to account 10 per cent of the overall billable employee cost at IT firms, has fallen to around 3 per cent. IT firms typically use the contractual workers from staffing solutions providers or subcontractors. 

“Right now, usage level of subcontractors by IT firms is low. But, we expect it go up in the near future as economies open up,” said Supaul Chanda, vice president at Experis of Manpower Group. “As of now, we have not seen any layoffs (by the staffing companies). But, we can't have a high bench for long time.” 

US-based Manpower Group, along with Swiss firm Adecco and Dutch firm Randstad, are among the large subcontractors that supply critical human resources to global IT industry. These staffer play a critical role in faster execution of projects as well as temporary spurt in demand, mostly in the US and European regions. 

In the past few years, subcontracting costs for most IT firms have increased manifold due to protective measures around issuance of H1-B work visas. Also, demand for higher digital skills have led to increased demand for subcontractors in recent years. In FY20, sub-contracting cost stood at 22 per cent of the overall employee cost at Wipro while for TCS and Infosys it stood at 3 and 12 per cent respectively. 

According to HR experts, given the focus on cost control by Indian IT firms, the use of subcontractors is not expected to see any significant rise in coming quarters. All big firms such as TCS, Infosys and Wipro have said that they would reduce their dependence on subcontractors and use their own resources instead to execute projects in their bid to control cost. 

“We have opportunities to rotate our subcontract (contractual employees) and replace them with our own people. So there are a few levers that are still available where we can try to improve utilisation,” UB Pravin Rao, chief operating officer at Infosys, had said in a post earnings analyst call.