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IT firms’ attrition easing as pay hikes on the way

The IT sector has been hit majorly by rising attrition levels even when the firms were scouting for talent as fallout of the rise in outsourcing demand.

L. Ravichandran, President, IT services, Tech Mahindra is of the opinion that while attrition is slightly high in the industry, it will start to slow down in the coming quarters as almost all the companies have finished salary hikes and the effects will start to show from October.

The salary hikes are a good way to retain employees. Ravichandran added, “When people see stability and pipeline, they don’t jump.”

A Nasscom report on the industry forecast that earnings could rise by 10-20 percent in FY11. The report also added that the attrition level was up by 8-10 percent in March as compared to the same period last year.

In a bid to retain employees and boost their morale, companies employed many strategies like providing stock options to the staff. There is growing priority placed on the employees. Recently HCL Technologies announced their slogan, “Employee first; customer second” signaling the many strategies employed to retain talent.

Sandeep Muthangi, Analyst, IIFL believes attrition will lower in the coming quarters as frequent job switches by employees have raised wages to unaffordable levels.

“We should stop the wage raises now only, otherwise our costs will become high, our margins will be slim and we will start losing business to China or Philippines. The speed of salary increases have started hurting us already,” said Deependra Chumble, Hiring Manager at Hexaware Technologies.

As the global economy set in the recovery path, IT biggies like Wipro, Infosys and TCS started recruiting in a big way. TCS has increased its target of hiring from 30,000 to 40,000 for the year. Infosys has also plans to add 6,000 more to its annual hiring projection of 36,000.

Chumble added, “The demand for skilled workforce has picked up quite a bit and the supply is not there as of now. So the attrition levels are high, therefore the premium paid to some of the skills is very high.”

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