TCS attrition rises to 19.7% in Q1FY23, 14,136 employees added during the quarter

IT services firm Tata Consultancy Services saw attrition for the Q1FY23 come in at 19.7 percent on a last twelve-month basis, which is the highest in the last six quarters. It is up from 17.4 percent in Q4FY22. TCS added 14,136 employees in the first quarter of FY23, taking its headcount to over 6 lakh. On a year-on-year basis, its net addition numbers were down from 24,000 in Q1FY22 to 14,000 in Q1FY23.

TCS had announced a hiring target of 40,000 for FY23 at the end of FY22. TCS CFO Samir Seksaria said the company is on track to hire 40,000 people this fiscal, and is not its changing hiring target. The company's leadership said hiring is positioned to contract or expand depending on demand.

Commenting on the attrition numbers, CEO Rajesh Gopinathan said attrition in this quarter should be also considered from a seasonality perspective as junior level employees go for studies or other areas, but said that it has not yet started to dip.

"On an absolute basis, it is continuing to increase, though on a percentage basis, it is starting to flatten and we expect that that may continue into part of Q2 also. It will be H2 when we will start seeing some amount of more meaningful moderation of it. That's our immediate short-term view on attrition but from a medium long term, we think that both the supply side as well as the demand side is easing up - in terms of talent coming from outside of the immediate industry system and that should play into moderation," he said.

Chief HR officer Milind Lakkad said in a statement the company has invested in strategic talent development initiatives and the linking of learning to career development has “energized our workforce.”

He added that employees have received salary increases of 5-8 percent, and top performers have got bigger hikes. “Continued hiring momentum resulted in a milestone quarter, with the employee strength crossing the 600,000 mark,” he said.

The company added that about 20 percent of the workforce now works out of its offices.

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CFO Samir Seksaria also said it was a challenging quarter as the operating margin reflected the impact of the annual salary increase, “the elevated cost of managing the talent churn” and gradually normalising travel expenses.

TCS had hired over 1 lakh freshers in FY22 and in the last quarter — Q4FY22 — the company had added 35,209 employees.

Attrition has continued to be a concern for the company in what is an industry-wide problem, with attrition going up from 8.6 percent in Q1FY22, 11.9 percent in Q2, 15.3 percent in Q3, and 17.4 percent in Q4, and 19.7 percent now in Q1FY23.

However, it is important to note that despite elevated attrition levels, TCS’ was the lowest among its peers last year.

In a note, Kotak Institutional Equities had said attrition levels of over 20 percent were expected across IT services companies “as they deal with talent crunch in a buoyant demand environment.” Reliance Securities said though attrition would remain elevated, “it has peaked out for now” and expects moderation in attrition in IT services in the second half of FY23.