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Top 4 IT firms’ employee cost rises despite headcount drop

Despite a drop by 36,000 employees in their cumulative headcount in the last one year, top four IT companies – TCS, Infosys, HCLTech and Wipro – haven’t been able to bring down their employee cost in the same time period.

While their revenues grew 6.32%, year-on-year (y-o-y), the employee cost in the same period rose by 9.4%, data sourced from Capitaline revealed.

During the just-concluded quarter, these four giants posted a cumulative revenue of Rs 1.48 trillion. A year ago, their cumulative revenue was Rs 1.39 trillion. However, in the same four quarters (between Q2FY23 and Q2 FY24), their total employee cost rose from Rs 77,679 crore to Rs 85,026 crore.

The top four IT companies have also made efforts to improve their utilisation ratio by optimising their bench. Utilisation rate is the number of employees on any active project. And bench refers to employees on a company payroll who are currently not on any active project. While all IT firms have a sizeable bench strength at any given period, a higher utilisation rate normally translates into better cost optimisation.

While utilisation for Infosys has gone up to 80.4% in the just-concluded quarter, from the level of 78.9% in the first quarter of this fiscal, Wipro’s utilisation has improved to 84.5% in the September quarter. Similarly, HCLTech and TCS, which do not give utilisation metric, but said in their earnings call that utilisation has improved.

These firms are also now comfortable in their attrition rate, which is hovering in the range of 14-16% currently. Wipro saw its attrition falling to 15.5% in the just-concluded quarter, from 17.3% in the June quarter. TCS, Infosys and HCLTech also saw their attrition down to 14.9%, 14.9% and 14.2%, respectively, in the last quarter.

Pareekh Jain, founder of Pareekh Consulting, said that because of great resignation which ended last fiscal, attrition was higher and, therefore, new hiring was done at a higher cost by IT companies. The second factor that is behind high employee cost is the more onsite hiring they did to reduce subcontracting cost.”

Jain further added that in this calendar year, IT companies also made few acquisitions, apart from securing re-badging deals wherein they absorbed few thousands of employees based abroad. Financial Express

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