India's top five IT companies — Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro and Tech Mahindra — added 83,906 employees in FY23, a 69 percent decline from the previous year's addition of 2,73,377 employees. Among the five companies, only HCLTech added new employees in each quarter of the fiscal year. The earnings season was lackluster, with mixed or muted results and cautious outlooks for the next quarter, given the prevailing macroeconomic conditions.
Net additions and hiring are indicators of demand. However, companies say that their utilisation is low and attrition is falling, which suggests that they have room to grow and do not need to hire as aggressively.
TCS, Infosys, Wipro, and Tech Mahindra have all experienced net headcount reductions during one of the quarters. Wipro and Tech Mahindra have both seen a reduction in headcount for two consecutive quarters – in Q3 and Q4.
According to company executives, the talent market is cooling down and returning to where they were prior to the pandemic years. FY22, in particular, has been termed as an aberration when it comes to net addition, and experts say companies will move closer to their net addition levels pre-pandemic. This is already starting to show up, as FY23's net addition figure is closer to that of FY21's net addition of 86,685 employees.
Hiring was on a tear as a result of pandemic-induced demand, with a large number of freshers hired as well. Now, those numbers are being staggered for onboarding, but due to declining utilisation, some companies haven't committed to hiring numbers for Q4.
Tech Mahindra saw the steepest drop in headcount addition for the year, adding only 1,227 employees on a net basis, compared to 30,119 net additions last year. The company added 6,862 employees in Q1, 5,877 in Q2, went into the red by 6,844 employees in Q3, and saw another consecutive decline of 4,688 employees in Q4.
At the same time, the company has the lowest attrition rate among its peers, at 15 percent.
Harshvendra Soin, the company’s Chief Human Resources Officer, told analysts after the results on April 27 that the company’s internal fulfillment rates have increased substantially.
“Our focus is on upskilling, giving opportunities from within, and it has really worked out. Add to this the fact that our attrition is also the lowest among our peer set gives us a lot of confidence tha the strategy is working and folks are getting more opportunities internally so we don’t have to go out every single time,” he said.
Wipro is the other company that has seen a negative headcount reduction for two consecutive quarters. Speaking to the press on April 27, Chief Executive Officer Thierry Delaporte attributed the headcount decline in Q3 and Q4 to the large addition the company made in the first quarter of the fiscal — 15,446 employees on a net basis. (This fell to 605 in Q2, saw a decline of 435 in Q3 and another decline of 1,832 employees in Q4).
Delaporte said that high addition in Q1, lowering utilisation and impacting margins, was done knowing that the company would need them in later quarters. These people, he said, are being trained, onboarded and deployed.
“If you look at the evolution of the headcount, in a given quarter, you might not necessarily see this impact. The reality is that we will continue to hire, there is demand, we are growing in some areas, on some specific skills, where there's very high demand, and we need to continue to hire. At the same time, attrition is going down, so we need to take into that account. Finally, the fact that with our level of utilisation — which has improved over last few quarter — we see also that there's some room for improvement,” he said.
Wipro added 22,000 freshers during the year, which it said was the highest it has done so far.
Infosys, Wipro’s cross-town rival, saw a headcount decline of 3,611 during the last quarter of FY23. Its headcount addition for the year also fell along with attrition. It added 29,219 employees on a net basis in FY23, down from FY22’s 54,396. The company hired 51,000 freshers during the year. While it usually gives a target number for hiring for the year ahead, it did not do so this time.
During the company’s earnings press conference, Chief Financial Officer Nilanjan Roy said that the softness in demand is what led to utilisation falling to 80 percent, and it expects this to increase gradually in coming quarters.
“We will calibrate the hiring for FY24 based on the available pool of employees, growth expectations and attrition trends.” He added that they have a lot of people on the bench as well. “I think our model in terms of hiring has got enough flexibility to take care of new volumes. In any case, we have a rich bench, 80 percent utilisation is what we have, and usually, we have operated well above that,” he said.
Kotak Institutional Equities had said in its note that the headcount addition for FY24 could be tepid due to “limited demand visibility, significant headroom on utilisation, moderating lateral attrition and trainees becoming billable”.
HCLTech's net headcount dropped from 39,900 to 17,067 over the year, but it did manage to add employees each quarter, including over 25,000 freshers. “While we are scaling fresher intake, we still have an opportunity here. We will have sustained focus on this over the next two to three years to improve this further,” Chief Executive Officer C Vijayakumar said.
In FY24, the company targets to add 15,000 freshers which will be higher than the gross addition.
Lastly, TCS, which kicked off the earnings season, saw a marginal increase of 821 employees in Q4, following a reduction in headcount in Q3. Attrition has moderated to 20.1 percent as of Q4FY23, and it has been declining from peak levels. During FY23, the company added 44,000 freshers as well as their “highest ever number of experienced professionals during the year,” according to CHRO Milind Lakkad.
Apart from HCLTech, TCS is the only company that has stated how many freshers it plans to hire in FY24, having rolled out 46,000 offers.
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