Demand for tech talent could spell alarming attrition rates at IT companies

Early attrition, which refers to employees leaving within a short span of time, is a new trend among IT companies. bloomberg
Early attrition, which refers to employees leaving within a short span of time, is a new trend among IT companies. bloomberg


Employees are leaving their jobs amid increased demand for the best talent in digital skills

The Indian information technology (IT) sector is staring at an alarming attrition rate in FY22 amid a revival in demand with companies battling to hire the best talent in digital skills.

The voluntary attrition rates at India’s top IT companies have risen on a quarterly basis indicating a war for talent is on.

The attrition rate at Infosys Ltd increased to 15.2% in the March quarter from 10% in the previous quarter. The management has attributed the rise in attrition to the increased demand in the market. Infosys continues to take measures such as reskilling and compensation benefits to retain top talent, said U.B. Pravin Rao, chief operating officer.

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Wipro Ltd’s voluntary attrition for Q4 increased sequentially to 12.1% from 11%, reflecting an industry-wide trend. To keep employees in their jobs, the company is providing both financial and soft perks, said Saurabh Govil, chief human resources officer.

Wipro has already doled out salary increments to its junior employees effective January. Increments for senior employees will be effective June.

The only exception was India’s largest IT exporter Tata Consultancy Services (TCS) Ltd where attrition dropped to an all-time low of 7.2% in Q4 from 7.6% in Q3.

“TCS has a great history of believing in its employees and continuously investing in them, and therefore, we continue to maintain our industry-best retention rates," TCS chief executive Rajesh Gopinathan said in its Q4 earnings call.

In addition, early attrition, which refers to employees leaving within a short span of time, is a new trend among IT companies.

According to talent consulting firm Han Digital, 5-8% of full-time employees hired in the January-March quarter left within the first 90 days. For contractual hiring, the attrition rate is as high as 15-20%. Human resources executives believe the trend will continue through 2021.

Hiring was subdued last year as the business environment was weak and companies took a wait-and-watch approach.

“Now, with new deals and a strong deal pipeline, the hiring plans are exploding. Many companies have announced promotions, bonuses and new remuneration models, and employees who think they deserve better will look out for better options," said Saran Balasundaram, founder and chief executive officer, Han Digital.

“Attrition is also an outcome of reactive employee emotions when satisfied employees in current companies are deceived when they realize that new joiners at their career level are getting a minimum of 20% more salaries just because they changed their current employment. The industry can look forward to over 1 million resignations this year," Balasundaram added.

According to a Michael Page 2021 report, 77% of technology professionals will voluntarily leave their current jobs and look for new ones in 2021.

The factors that would lead these professionals to leave are lack of growth opportunities, potential for higher pay and better benefits, and underutilized skills, the report said.

It added that 70% of technology professionals considered remuneration and benefits as their top priority when accepting a job offer, followed by job scope and professional development opportunities.

The Michael Page report also said that skills in artificial intelligence and machine learning will be in high demand as there has been high scale adoption and migration to cloud across public, private and hybrid model. Roles for cloud architects, full-stack engineers, and heads of engineering are among the most sought after, it added.

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