India's top IT firms' headcount drops first time in a decade

By the end of the June quarter, the top four - TCS, Infosys, Wipro and HCL Tech employed 10,15,000 employees - down by 9,144 employees over the previous quarter.

For the first time since the global financial crisis in 2008-09, the net headcount of the top four IT services firms - Tata Consultancy Services, Infosys, Wipro and HCL Technologies - declined in April-June 2020-21.

The data compiled by the BS Research Bureau shows that never before have all four firms seen a fall in staff count, at least not for a decade, despite several business cycles.

The pandemic has been the worst event for the IT industry in the last 30 years.

By the end of the June quarter, the top four employed 10,15,000 employees - down by 9,144 employees over the previous quarter.

While TCS’ headcount fell by 4,788, it was down by 3,138 employees for Infosys on a sequential basis.

The employee count of HCL Technologies declined by 136. For Wipro, it was down by 1,082 staffers on a sequential basis during Q1 of FY21.

For Infosys, the fall in numbers was due to a general freeze in lateral hiring, though the company continued to look at employees in niche skill sets.

Infosys saw a drastic drop in attrition during the period to 11.7 per cent from 20.2 per cent and experienced its utilisation levels (excluding trainees) falling to 81.2 per cent in Q1 of FY21 as against 83.5 per cent in the previous quarter.

The headcount fell as the companies closed the tap on lateral hiring and utilised internal candidates to backfill vacancies.

According to industry experts and company officials, a delay in project ramp-ups, coupled with the cancellation of projects in the worst-affected verticals such as retail and travel and hospitality, prompted the four to optimise costs.

As 55-60 per cent of the cost of IT companies goes on salaries, the big four froze hiring and raised current utilisation levels.

“Around 4-5 per cent of bench strength (reserved employees) was used for repurposing and filling up the vacancies of 1,500-2,000 people during the quarter.

"This has increased the utilisation levels by 1.5- 2 per cent,” said V V Apparao, chief human resource officer at HCL Technologies.

Lack of growth visibility and a fall in attrition during the quarter were the primary reasons behind the slight fall in the overall employee count, added Apparao.

At TCS, internal talent was used to fill up both new posts and any vacancies that cropped up during the quarter.

Around 4,500 junior positions were filled internally through strategic talent development.

“Through our operational excellence, we have not added people and filled vacancies through internal talent management. Hence, the net result is a negative number,” said Milind Lakkad, global head, human resources, TCS.

Due to an uncertain demand environment, around $15 billion worth of contracts coming up for renewal in the June-September period are facing delays or cancellations, according to global consultancy firm Omdia.

Though IT firms have won a good number of large deals in the April-June period, there is doubt about whether this can be sustained in the event of a second wave of the pandemic.

Against this backdrop, companies are relying heavily on their internal resources as the number of reserved employees or ‘bench’ shot up in the recent past.

According to sources, bench strength has gone up by around one percentage point from around the 6-7 per cent seen in normal times for most IT services firms.

Omkar Tanksale, IT analyst at Axis Securities, said the overall headcount had fallen as IT services companies were more cautious about uncertainty across geographies in the months of April and May and also faced supply side constraints.

“However, demand remains resilient and ramping up of deals is happening slowly from the second quarter.

"The management of most of the companies remains positive about the forthcoming quarters and will slowly ramp up the new deal wins.

"We can see an uptick in the headcount going ahead, mainly in H2 FY21,” said Tanksale.

Photograph: Reuters