During the downturn, most technology firms had cut down on hiring but with the demand picking up, top firms including Tata Consultancy Services, Infosys Technologies and Wipro Technologies implemented wage hikes to check attrition. Despite this, attrition rates remained high for TCS (13%), Infosys (17.1%) and Wipro (19.4%). Higher attrition rates are expected to remain a concern for the industry since replacing people, with fresh graduates would cost 8-10% more.
Analysts point out that every 5 % points of attrition potentially knock off 150 bps from gross margins. Another way to describe this would be, every 5% raise in attrition can neutralize 3-4% in currency depreciation, or 2% average pricing hikes.
While the impact of attrition on a company’s gross margin is well known, its other (side)effects include -
· Higher recruitment and training costs,
· Loss of business momentum via delays in staffing,
· Potentially poor delivery against peers in multi-vendor contracts,
· Larger cuts to margins in fixed-price engagements.
Even though tech firms including TCS, Infosys, Tech Mahindra and others have indicated that they are not looking at another round of increments, to retain existing employees, Top IT firms could look at 8-10% hike for fresher(s). The increased entry level hires coupled with greater competition from MNC vendors will likely result in a jump in fresher salaries. This will further put pressure on margins, especially at Tier-II vendors.
However, Infosys said they weren’t concerned about attrition as it is a part of the model and companies have survived it in the past. We are not looking at hiring fresher(s) at increased costs. Salaries would be at the same levels as they were last year. TCS said that the company would take steps in line with industry trends. We are looking at hiring more laterals in the coming quarters and wage hikes for them too would be driven by demand.
- Cheers
No comments:
Post a Comment