Home / Industry / Infotech /  IT sector dials down on contract staffing

Contract hiring by the information technology (IT) services sector has dropped nearly 20% with tech companies, weighed down by rising margin pressure, focussing on retaining their permanent employees. Recruitment companies are also scrambling to get more clients on board amid falling demand from the IT sector.

“Tech talent hiring witnessed a 10-20% decline in demand for contract staff since March this year among IT firms. The main reasons contributing to the slump are macroeconomic conditions playing out and IT services firms shifting focus on retaining permanent employees," said A.R. Ramesh, director of digital business solutions, professional staffing and international engagement, Adecco, a human resources provider and temporary staffing company.

Adecco estimates that there are about 10-12% of contract workers in the IT and IT-enabled services (ITeS) space with less than eight years of work experience in the technology space.

The drop in contract staffing comes on the back of a ballooning crisis in the IT sector where firms had gone on a hiring frenzy after two years of a covid-induced lull. From the second half of 2021 to a quarter back, firms were offering 60-70% hikes and counter offers as businesses across sectors needed tech teams to digitize their systems and run cloud computing operations.

However, saddled with a large bench strength—employees who were hired but not deployed—and a slowdown in US-based clients, tech firms are slashing their hiring targets for the next fiscal year. Onboarding of campus recruits has been delayed by many tech firms by six months, and the spillover to the next year means a reduced need for contract workers.

“Tech firms are now realizing that they have to balance the long-term with the short-term in attracting and retaining talent. Correction was needed in some recent short-term tactics and that may have impacted the demand for contract staff if not completely reduced," said Rituparna Chakraborty, co-founder and executive director of TeamLease Services.

Recruitment firms heavily dependent on contract staffing will take a hit on their revenues if the trend continues.

“About 40% of our revenues depends on IT contract staffing and there has been a 30% dip in demand in this quarter (July-September) compared to the previous three months," said Saran Balasundaram, founder of tech recruitment firm HanDigital. Balasundaram said if the trend continues, their revenue from contract staffing in IT will take a hit of 12-15% by the end of this financial year.

Staffing firms said they are “knocking on doors" to increase their client base and escape a revenue hit. “We have been trying to knock on more doors to generate business and looking for greener pastures to generate new orders and at the same time working harder to generate more candidates for firms to choose from," said Aditya Narayan Mishra, director and chief executive officer, CIEL HR Services.

The recruitment firm has seen a 10-20% drop in hiring mandates in July-September compared to corresponding period of last year.

ABOUT THE AUTHOR

Devina Sengupta

Devina Sengupta reports on the shifts in India Inc’s workplaces, HR policies and writes about the developments at India’s biggest conglomerates. Her stories over the last decade have been picked up and followed by Indian and international news outlets. She joined Mint in 2022 and previously worked with The Economic Times and DNA-Money.
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