Bangalore: Desperate to rein in high attrition levels, India’s top information technology (IT) firms are offering mid-term hikes, promotions and even restricted stock (shares that are locked in for a fixed period before they can be sold) to keep employees from hopping on to rival companies.
Most IT firms had cut perks and frozen salary hikes during the downturn of 2008-09 as business from customers had slowed.
But with the economy improving in the US—the largest market for Indian IT firms—customers are offshoring more work to save costs and remain competitive.
To meet this spurt in demand, IT firms are scouting for experienced employees who can deliver quality codes to their customers.
Graphic: Paras Jain; photo: Madhu Kapparath/Mint
Much of this requirement is at the three- to seven-year experience level, the segment where most IT firms are losing employees.
Some “85-90% of IT-ITeS (IT and IT-enabled service) companies now are looking at off-cycle compensation-related interventions such as retention bonuses, off-cycle salary increases and equity-based incentives to control this situation,” said Sandeep Chaudhary, performance rewards consulting practice, South and West Asia, for US human resource consultancy Hewitt Associates.
Infosys Technologies Ltd, India’s second largest IT firm, has given two salary raises —8% and 13-17%—since October. In June, it gave at least five shares to each employee to commemorate the beginning of its 30th year.
These measures, though, haven’t cured it of its troubles yet. In the June quarter, Infosys lost 15.8% of its employees—its highest attrition since 2002.
Chief executive officer S. Gopalakrishnan isn’t daunted. “We expect attrition to subside in the next two to three quarters” as the churn settles in the industry, he said.
Wipro Ltd, the third largest IT firm in the country, gave promotions to 20,000 employees earlier in July—more than double its typical number in a year—and handed out restricted stocks (securities locked in for five years) to 8,000-9,000 middle and senior managers.
“Typically, promotions are given to 7-8% of the workforce,” says Saurabh Govil, senior vice-president, human resources, at Wipro Technologies, the firm’s IT services arm that has some 112,925 employees.
“Steep hikes are not the only answer,” he said. Staff would also be given options to work onsite or in different roles. Wipro’s attrition in the June quarter was 23%.
Tata Consultancy Services Ltd’s (TCS) attrition at 13.1% was the lowest among the big three. India’s largest IT firm gave promotions and average wage hikes of 10% in April, after a gap of one year. Its focus now is on non-monetary components: rotating jobs more often, not just within projects but across technologies, verticals and locations; and encouraging more first-time managers to take up people management courses.
“Retention is the focus today,” said Ajoy Mukherjee, vice-president and head of global human resources at TCS.
He ruled out a mid-term pay hike, but the variable pay component distributed every quarter, he said, would help retain people.
Chaudhary, too, does not favour excessive hikes. “While compensation may seem to be the most obvious cause of the current attrition, excessive usage of compensation-related interventions is not recommended as this will actually intensify the problem of wage inflation.”
The IT biggies, meanwhile, are adding to the churn in the industry.
Infosys has raised its hiring forecast for fiscal 2011 to 36,000 from the 30,000 it announced in April. TCS plans to hire 40,000 people. And at least a third of these hires would be experienced professionals from rival firms.