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Why Infosys, TCS, Wipro, others are facing record-high attrition rates

Record-high attrition rates are adding to the woes of the Indian IT industry as companies face cost overloads and margin pressures. Tata Consultancy Services (TCS), Infosys, and Wipro – the top three IT behemoths in India – raised their net hirings to over 50,000 in the first quarter of the financial year 2022 as a result of high attrition, as per their financial results.

What are the current attrition rates in the Indian IT sector?
Attrition rate refers to the metric used to measure the loss of employees over time. Infosys’ attrition rate stood at 28.4 per cent, the highest among Indian IT bellwethers, in the first quarter of the financial year 2022. Wipro came in next with an attrition rate of 23.3 per cent while the attrition rate at Tech Mahindra was reported at 22 per cent. CP Gurnani, Managing Director and Chief Executive Officer of Tech Mahindra, reasoned that the high attrition rates could be attributed to the rapid expansions in the industry. He said, “In general when an industry goes through a rapid surge, there is shock with attrition rate running at 23-24%, I think that shock stage is now coming down.”

TCS’ attrition rate spiked to 19.7 per cent, a rise of 2.3 per cent from the previous quarter, albeit lesser than its peers. Rajesh Gopinathan, CEO of the largest Indian IT company TCS, pointed out after the quarterly results announcement that the firm’s attrition rate has not come down yet, but might do so in the coming quarters. He said, “On an absolute basis it (attrition rate) is continuing to increase though on a percentage basis it is starting to flatten and that may continue into part of Q2 also.”

Graph showing growing attrition rate at Indian IT majors

Why do employees switch jobs so often in the Indian IT sector?
Based on numbers alone, the attrition rates at Indian IT companies are on the higher side compared to other industries.

An IT sector employee based in Bengaluru told Business Today why he thinks Indian techies change jobs so often. He said, “The growth opportunities are very less if we stay in the same company for more than 1-2 years now. The growth trajectory at any of the top Indian IT companies is not the same like it used to be before, we have cutthroat competition in the industry.”

TV Mohandas Pai, former director at Infosys, also stressed that there is an excess of people working in the Indian IT industry. He told Business Today, “There is a surplus of people in the system. All of them want to join the big companies and build a career and get good training.”

Another IT sector employee told Business Today that the high attrition rate could be because of better pay by other multinational corporations in the same sector.

She said, “Why I and why most people around me leave Indian IT jobs is because of financially better paying opportunities at MNCs like IBM, Capgemini, Accenture, etc. They pay relatively more for similar roles.”

Is there a cost associated with attrition at Indian IT companies?
The cost of attrition includes the expense of training a new employee, salary paid in that time frame, and the foregone billings in the training phase, among other expenditures. Pai explained how the cost of attrition adds up for an IT company. He told Business Today, “The cost of attrition is very high. It is $5,000 per person. Let me give you an example, if somebody leaves, you hire someone new, and you have to train them for six months. They are not billable for that time. Moreover, you got to pay a salary for that time as well.” BusinessToday

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