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As a result of continued slowdown in business, IT companies will ensure tight control on costs. Photo: Mint
As a result of continued slowdown in business, IT companies will ensure tight control on costs. Photo: Mint

Covid-19 impact: IT-ITeS sector may trim workforce to cut costs

  • Contrary to popular belief that flexi staff could be the first to be laid off during such times, experts believe they may actually have an advantage

BENGALURU: IT and IT-enabled services companies in India may have to trim their workforce or hire more flexi staff as part of cost cutting measures with projects getting delayed due to the Covid-19 pandemic.

Contrary to popular belief that flexi staff could be the first to be laid off during such times, experts believe they may actually have an advantage as they come with variable cost structures and minimal compliance requirements.

“As a result of continued slowdown in business, companies will ensure tight control on costs and trimming of staff will be one of the many measures that will be used. When this stage does arrive, IT-ITeS companies will use factors like skills & competency, outcomes & impact, and costs & compliance when deciding which employee types will be given a trim," said Sanchit Vir Gogia, CEO and chief analyst, Greyhound Research.

While there is no single silver bullet to suit all types of organisations, retention of employees will be dictated based on client needs, skill requirements, and financial health of the company. “As companies try to ensure least impact on financial payouts and compliance costs, and focus more on outcome-driven engagements, flexi workers have an upper hand," Gogia said.

Most IT-ITeS companies do not make public the number of flexi staff they employ and some of the companies Mint reached out to, including TCS, Wipro, and Genpact, did not comment for the story.

“Clients may opt for additional temp(orary) staff against permanent placements in such an uncertain environment. They may also switch to more variable pay in the salary structure as opposed to fixed pay, in line with pay-for-performance philosophy," added Yeshab Giri, director of Staffing & Randstad Technologies, Randstad India.

The IT-ITeS sector tops flexi-staff adoption with around 12 out of every 100 employees being contractual or flexi staff, according to Indian Staffing Federation (ISF), the apex body of the domestic flexi staffing industry. The sector’s flexi workforce is expected to grow to 720,000 by 2021 from 500,000 in 2018, according to ISF.

The move towards contract hires has been a trend across industries, but it had become more visible in the IT-ITeS sector because of the high requirements for project-based work. However, uncertain business environment due to Covid-19 is forcing organisations to review their business and employment strategies.

Despite having certain advantages, flexi staff will be impacted in terms of the salary they can command amid subdued hiring. “If the current situation persists for long, the temporary workforce may have to come in for reduced pay as companies keep them on standby for ramp up/down kind of situations," said Giri. “There is a possibility of projects getting delayed if things move to the next stage of lockdown. We do see hiring and onboarding activities getting rescheduled to April and this is more from a wait-and-watch strategy that IT firms are adopting during this crisis."

ISF is already seeing hiring of contractual workers being postponed by various companies though there have been no cancellations yet. “The real impact will be visible in 2-3 weeks down the line," said Rituparna Chakraborty, president, ISF.

If Covid-19 becomes a long-term phenomenon, all companies will have to bear the brunt with varying degrees of impact. “Startups are already feeling the heat as they are unable to bear the losses. For the IT sector, a lot of the business comes from outside of India with high exposure to the US and Europe, so it’s even more uncertain," Chakraborty said.

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