Top 5 Indian IT companies hire 59,704 employees in Q1 

According to industry experts, at least 50,000 more startup employees are likely to be sacked this year in the name of "restructuring and cost management". (Representative image)

Hiring and attrition remained pain points for information technology (IT) companies in the first quarter of the 2023 financial year amid an ongoing battle for tech talent.

The top five IT companies — Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies and Tech Mahindra — cumulatively added a net 59,704 employees in the three months ended June, including freshers and lateral hires.

Net additions at TCS, HCL and Infosys declined sequentially but Wipro and Tech Mahindra reported an increase. On a sequential basis, overall net additions were significantly down across these five companies, which had hired 85, 720 new employees in the three months ended March.

On a year-on-year basis, the number was an improvement over the first quarter of the last financial year, when these companies had hired 41,471 people.

The attrition rate inched up at Infosys, TCS and HCL nd moderated at Wipro and Tech Mahindra.

Hiring has been muted at many IT companies in the quarter, but hiring plans for FY23 are broadly on track, said Piyush Pandey, Lead Analyst - Institutional Equities, YES Securities.

Also read: Infosys grows fastest among peers, adds 21,171 people during the quarter

“Freshers also generally join from Q2 onwards so that also explains lower hiring for Q1. A few of these companies had slightly lower utilisation (due to big hiring in FY22) and have sufficient room to grow just by increasing utilisation,” Pandey said.

In FY23, TCS plans to hire 40,000 freshers, Infosys has guided for 50,000, Wipro 38,000, HCL 35,000 and Tech Mahindra around 10,000.

The difference in net additions this quarter at the top IT companies is a result of which of them reacted to the surge in demand cycle first when the pandemic broke out, and started hiring in large numbers consequentially, said Amit Chandra, Deputy Vice President, HDFC Securities.

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

“Some companies started hiring early, and the maximum bulk of hiring happened last year. Some started a bit late. So that's why the quarter-on-quarter variation you are seeing,” Chandra said.

“The general trend is that TCS started hiring a bit early, and Infosys, they're still hiring. You have to see this from the point of view of what happened pre-pandemic. For the last 3-4 years these companies didn't hire much,” Chandra told Moneycontrol.

Broadening of the pyramid 

The hiring trends have been closely related to cost control and hence the operating margins of the IT companies. Over the past five-six quarters, these margins have been consistently declining, with many expecting them to bottom out in another quarter before starting to improve.

Wipro Chief Financial Officer Jatin Dalal said employee costs have had key impact on margins, calling “pyramid and fresher improvement” a key lever to improving margins.

The pyramid model involves having more employees with less experience at the bottom, which will help keep costs low, and fewer employees higher up the pyramid.

Dalal said Wipro intends to double fresher hiring from last year’s level adding that the company’s ability to “correct the pyramid through consistent improvement of the base and moving people up through the pyramid would be a big structural lever.”

Trainee bench 

TCS Chief Executive Officer Rajesh Gopinathan shared a similar outlook, stating that Q1 was a lighter quarter comparatively for trainee absorption by the company, with Q2 and Q3 being the main periods for hiring.

“Last year, we had gone very aggressive and hired through the year to build up a more than 100,000 trainee bench. This year is more normal. We're progressing well on that 40,000 [fresher hiring] mark,” he said.

Also read:  Wipro Q1 net additions buck industry trend

C Vijayakumar, CEO of HCL Technologies, attributed the decline in net hiring from 11,000 in Q4FY22 to 2,089 in Q1FY23 to additional capacity created by hiring of both freshers and laterals.

"We have not moderated any hiring based on any demand environment. It's really to increase our utilization and better deployment of freshers,” he said, adding that the company plans to take onboard 10,000 freshers in Q2.

Pre-pandemic, IT companies didn’t hire much and concentrated on adoption of automation, for which “the industry is paying the price” now, said HDFC Securities’ Chandra.

With the pandemic leading to a sudden increase in demand for tech services, attrition was extremely high, especially among employees who had over three years of experience or were in the five-eight-year experience bracket.

Companies are aware that bringing freshers into the billing cycle takes a period of six-eight months, Chandra said.

HCL’s Vijayakumar said the average time to make a fresher billable was taking longer in some parts of the business.