BackIT, startup hiring hits five-year low
The number of recruitment mandates from information technology (IT) and startup clients has dropped to the lowest level in five years
PremiumThe number of recruitment mandates from information technology (IT) and startup clients has dropped to the lowest level in five years. Poor visibility on workforce additions, overhiring, and layoffs continue to plague these sectors, with no indication of significant new employee additions this fiscal year, recruiters said.
“The number of mandates in the IT and startup sector has gone below 100,000 for the first time in five years. Even in June 2020, a few months into the covid crisis, the mandates had dropped to 104,000," said Kamal Karanth, co-founder of Xpheno, a recruitment firm specializing in tech and startup staffing. Xpheno has also seen mandates for contract staffing drop by 40% in the June quarter from a year earlier.
This week IT firm Cognizant said it would let go of 3,500 employees as it streamlines operations.
“The talent environment today is different from a year ago. The race to hire ahead of demand has been replaced by a more measured approach in light of the declining attrition rates and the ongoing economic uncertainty," said Saurabh Govil, chief human resources officer at Wipro.
As firings continue, “lean" has become a buzzword within the startup ecosystem. “The demand in the startup sector dropped by 40% in the January-March quarter, compared to the same period last year," said Anshul Lodha, head of recruitment agency Page Executive, India.
On Friday, Meesho said that it was laying off 251 employees, or 15% of its employee base. Meesho said it was looking to work “with a leaner organizational structure to achieve sustained profitability". CEO and co-founder Vidit Aatrey said in an email to employees that “leaders had made judgement errors in over-hiring ahead of the curve".
On 30 March, Unacademy said it was letting go 12% of its workforce, its fourth such layoff in the last 12 months. In an email to employees, co-founder Gaurav Munjal said Unacademy was looking to operate and build “in a leaner manner".
“Startups are working more efficiently with their employees. If earlier they needed 50 people, they are looking to hire only 30 employees now and working more efficiently," an investor said, requesting anonymity.
The reduction in contract hiring has exacerbated the decline in recruitment in India’s IT and startup industries.
Clients are no longer chalking out a hiring roadmap, said Aditya Narayan Mishra, CEO of CIEL HR Services, a staffing firm.
“The clients give mandates a few quarters ahead so that their workforce is ready to take on new work. But this time, they said there is very little visibility of the runway ahead," Mishra said.
Monetary policy tightening globally squeezed startup investments, leading to a decline in hiring since the last fiscal. In the manpower-intensive IT sector, a surge in employee costs has prompted them to implement cost-saving measures, affecting hiring. Employee costs at India’s top four IT companies—Tata Consultancy Services Ltd, Wipro Ltd, Infosys Ltd, and HCL Technologies Ltd—have risen by 19-23% in FY23, outpacing revenue growth.
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