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Most companies have been recording high attrition rate of around 15%. The rate is relatively low for Tata Consultancy Services (TCS) and high for Cyient and Mastek. The trend in employee attrition has been acting as a concern for the Indian IT companies with many firms in the sector witnessing a surge in attrition rates during the first quarter. 

The strong demand environment has led to supply side challenges as employee attrition has picked up across information technology (IT) companies which experts believe may have added margin pressures to these companies.

As per a report by brokerage firm Anand Rathi, attrition in IT companies is expected slow down from the fourth quarter (Q4) as hiring is strong and supply, constrained. Some companies have front-loaded hiring due to the current environment.

The note stated that even if attrition is relatively high for most companies, but this too seems to have been in the range of the past four years if managed well over the next two quarters.

After four successive rising quarters, Anand Rathi said it expects a modest dip in industry utilisation level in Q2 as hiring picks pace. Though, the net addition has been putting pressure on supply, leading to increasing attrition.

With strong revenue growth, headcount of most, especially the large caps, are at record highs. Net headcount addition for most companies, however, is likely to be strong in the second quarter (Q2). However, the record high headcount and net additions are putting pressure on supply, the report added.

Meanwhile, for Q2FY22, Anand Rathi expects the Indian IT companies to report a sequential improvement in terms of revenue. “Post-pandemic, revenue shares are up substantially for tech and to a lesser extent for BFSI and healthcare whereas revenue shares are down noticeably for communications and manufacturing," the recent note added.

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