What does TCS' Q2 numbers on attrition indicate about the IT sector?

IT stocks

Indian Market
by 5paisa Research Team Last Updated: 2022-10-11T09:59:12+05:30

Jobs may be hard to come by for most Indians, but not so much if you are an IT professional. This has been especially true for the past couple of years as the work-from-home requirements after the Covid-19 pandemic led to a boom in demand for technology professionals.

On the flip side, this led to a jump in attrition and wage costs at most IT companies. But the tide may begin to turn soon.

IT giant Tata Consultancy Services said it could hire up to 10,000-12,000 more freshers this year. This number will be in addition to the 35,000 people it had already hired till September 30 to take its total staff strength above the 6 lakh mark.

India's No.1 IT company will hire these thousands of fresh kids out of India’s engineering colleges, even as it continues to fight the scourge of attrition. 

However, in July-September, TCS net added just 9,840 employees, which was the lowest in many quarters. The company also feels that attrition could slow down soon.

"Attrition will need at least four quarters to come down to 20%. But the overall number of people leaving the company will come down significantly," said Milind Lakkad, Chief HR Officer of TCS.

So, what is the attrition rate that TCS is currently facing?

TCS on Monday announced its results for the quarter that ended on September 30. The attrition rate for the company’s IT Services business stood at 21.5% on an annualized basis in the July-September quarter from 19.7% in April-June. 

While the top leaders said the attrition may moderate in coming quarters, it was expected to remain higher than the company’s target.

“We believe our quarterly annualized attrition has peaked in Q2 and should see it taper down from this point, while compensation expectations of experienced professionals moderate,” said Lakkad.

But is TCS the only major IT company battling attrition?

Not really. Top Indian companies are battling high attrition rates in the past few quarters. The Indian IT industry recorded 25.2% employee attrition in FY22. The trend continued in Q1 FY23, with Infosys reporting the highest attrition at 28.4%, followed by HCL at 23.8%, and Wipro at 23.3%.

"With normalizing wage expectations and talent supply catching up across the industry, the company expects attrition to start to taper down in H2," the company added.

Has TCS fired any employees on charges of moonlighting?

Moonlighting has become a major issue for IT companies in India and all over the world. TCS on Monday said moonlighting is an "ethical issue" and against its core values.

Lakkad said that unlike peers like Wipro, which announced a sacking of over 300 employees recently, TCS has not taken any action against any employee.

The company, which employs over 6.16 lakh people, will take into account all the relevant dimensions while forming its final view on the issue which has been dominating headlines for the last few weeks, Lakkad said. 

The company's Chief Executive Officer and Managing Director Rajesh Gopinathan said that an employee is barred from working for any other organisation as part of the service contract.

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