Tech firms see increased dropouts as talents are armed with multiple job offers

Companies are increasingly seeing candidates with multiple job offers and financial compensation being the key factor getting the talents on board.

A data analyst with eight years of experience, has seven job offers in his hand from a mix of IT services firms, startups and product companies. Kamal Karanth, co-founder, Xpheno, a specialised staffing firm, who handed him the eighth offer last week from a product firm, said during the Moneycontrol Masterclass on April 2, that the gentleman has yet to accept the offer.

This is hardly an isolated event as companies are increasingly seeing candidates with multiple job offers and financial compensation being the key factor getting the talents on board.

This is a problem that is gripping the tech sector, which is staring at increased attrition, inflated salaries and drop outs as the talents try to make the best out of the situation that is in their favour. Going by the industry commentary this could last for another couple of years.

What is causing this?

Couple of reasons. For one, at the back of the pandemic, companies had to invest in technology to ensure business continuity. Enterprises across sectors accelerated their digital transformation journey including migration to cloud and improved customer interface. Two, is the pent up demand. With recovery in sight, companies that had paused their technology spending are now investing again.

Combination of these two are what has resulted in the increased demand for talent, or as some executives put it, war for skills.

War for skills

“We suddenly went from a downturn to a war for skill,” said Jagdish Mitra, chief strategy officer and head of growth at Tech Mahindra, at the Moneycontrol Masterclass episode on April 2. According to him this demand is likely to sustain for the next 1-2 years or longer as the need for tech skills have increased at the back of the pandemic.

Top IT and tech firms have hundreds of positions open with Accenture alone reporting over 18,000 job openings across the service lines. Skills that are in most demand include full stack developer, machine learning, and data analytics.

As companies fish for talent in the limited pool available, this is likely to continue resulting in inflated salaries, increased attrition and drop outs. According to Tech companies and startups drop out ratios can go as high as 50 percent for niche roles and they are forced to pay higher salaries to retain them.

Dropouts

Sunil C, Head- Specialised staffing, Teamlease Digital, a staffing firm, explained that drop outs can be defined in two ways. Candidates who do not accept the offer to get better compensation and those who accept the offer and do not join the firm. Both have seen an increase.

Bharat Kumar, founder and director, eSSL Security, a company that makes biometric attendance systems for enterprises, said that it has been challenging to hire talent with specialised skills such as embedded programming.

“With Atmanirbhar gaining momentum, there is a lot of Research and Development happening in the electronic manufacturing space. So the demand for related skills have gone up,” he shared.

This is resulting in the high attrition rate in the company’s engineering team of about 30 people. Total employee strength stands at 250. The company pays Rs 1.3 lakh per month for the engineering talents. With demand increasing, talents want to hike up to Rs 2 lakh per month, which the company could not pay.

“So I thought I would get the replacement. But it has been challenging due to unavailability of talents and also candidates not accepting the offer,” shared Kumar.

Instances of candidates rejecting the offer has seen a huge increase. Bharat shared that the number has increased from 10 percent, which was the norm, to 30 percent now.

Abhishek Kaushik, CEO & Co-founder, WeCP, a Bengaluru-based startup that works with top tech companies for technical assessment of employees, is facing similar problems.

“For our engineering hires we are seeing a significant increase in drop outs,” Kaushik said. For instance, if 5 of the 10 people the company interviewed accepted job offers earlier with 30 percent hike, this number has now come down to 3. What is more, the company is now forced to pay more for these hires compared to two years before.

“We are forced to increase the salaries,” Kaushik said. “The hike is not less than 50 percent for experienced professionals,” he added. This is in addition to the hike the company now pays to retain its existing employees.

What now?

This is likely to continue given the limited pool of talent available. Sunil said that drops have increased between January and March will further rise given the increased opportunities.

The companies also expect attrition to go up that had seen a record low at the back of the pandemic. UB Pravin Rao, COO, Infosys, during the earnings call in January said that the company expects the attrition to go up in line with demand.

To address this some of the firms are looking at increasing fresher intake and building talent in-house. Infosys has ramped up its fresher hiring in FY22 from 15,000 to 24,000. “In this quarter, we have seen tremendous growth. Given the growth momentum we are seeing and high utilization…attrition can possibly pick up. Considering all that we have increased the fresher hiring to 24,000,” Rao said.

In case of startups, ESOPs are also an option. Ashwini Asokan, founder & CEO, Vue.ai, said that equity in the company, where employees get a share of ownership, does help in retention. As more companies make ESOP buybacks, talents would be more willing to accept ESOPs as a part of compensation.