Home / Companies / News /  Tech firms turn to benched workers in uncertain market

NEW DELHI : India’s top information technology (IT) companies are turning to their bench strength to optimize costs and boost margins this quarter.

In earnings announcements for the December quarter, senior executives at these firms hinted at the possibility of bringing back a larger number of benched employees into the ‘billable’ workforce to handle certain projects.

The bench refers to employees on a company payroll who are currently not assigned an active project. While all IT firms have a sizeable bench strength at any given period, a higher utilization of the bench typically signifies better cost optimization for these companies.

Industry analysts and experts, too, said that the March and June quarters could mark a larger chunk of the unutilized workforce being brought into the billable workforce.

Most IT firms posted a rise in benched employee count last quarter. Infosys and Wipro reported an utilized workforce of 77.1% and 72.3%, respectively, down from 82.7% and 75.6% a year earlier. Infosys and Wipro ended the quarter with total headcounts (benched and unbenched) of 346,845 and 258,744 respectively.

Industry analysts and experts said the increased bench utilization is due to a rise in overall deal bookings. For instance, HCL Tech signed digital transformation and automation deals with Mondelez, the holding company of Cadbury. Similarly, Infosys signed $3.3 billion worth of deals in the December quarter, while Wipro announced deals worth $2.5 billion.

Utilizing the bench will also help the companies rationalize rising employee costs, experts said. “There has been a clearly positive sign in the overall deal bookings, and as hiring numbers fall, the companies will look inward to bring more of their employees into the billable workforce. FY24 is expected to be a year of margin consolidation, and since the unutilized workforce typically makes for the bottom of the pyramid in terms of the employee costs incurred, most IT firms will likely see clear benefits in operating margins as a result," said Ruchi Burde Mukhija, vice-president at financial research firm Elara Capital.

According to Akshara Bassi, senior research analyst at market researcher Counterpoint, greater utilization of the bench typically shows a cautious approach on behalf of companies due to the potential of weak demand in the near future. This may also offer firms the ability to better manage their costs, as opposed to fresh hires, she added.

To be sure, even as overall attrition in the IT services sector has gone down, staff costs have remained high due to diversification of deals from established sectors to new ones. Consequently, IT firms have to hire specialized, and hence more expensive, employees who can perform niche duties required for new sectors like blockchain, data analytics, etc. The bread-and-butter for the sector includes banking, financial services and insurance sector, healthcare, etc.

Omkar Tanksale, senior research analyst at Axis Securities, said TCS’ guidance of 25% operating margin by end-FY23 shows general positive signs in terms of the benched workforce coming into the field.

Since the bench largely comprises freshers with lower salaries, this could further help IT firms offset the higher salaries that they may pay for specialized roles.

According to data from job portal Foundit (formerly Monster.com), the average fresher salary in IT services was at 4,82,962-9,35,350 in FY23.


Shouvik Das

Shouvik Das is a science, space and technology reporter for Mint and TechCircle. In his previous stints, he worked at publications such as CNN-News18 and Outlook Business. He has also reported on consumer technology and the automobile sector.
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