Did attrition peak for IT companies in March FY22 quarter?

Has attrition in IT companies, which touched record levels in the March 2022 quarter, peaked? This question is being debated among experts in both the IT and HR sectors. Tata Consultancy Services, Infosys, HCL Technologies and Mindtree saw their attrition levels double (in percentage terms) in the quarter ended March 31, 2022, against the same quarter in the previous year. Cognizant and L&T Infotech (LTI) were not far behind. Their attrition nearly doubled.

The increase in attrition is an industry-wide phenomenon. However, its magnitude in the last two quarters has left everybody worrying as ‘war for talent’ continues to be the most-talked-about in company board rooms, experts say.

The US-based WNS Global stood out as it reported 44 per cent attrition in March 22 quarter (30 per cent), Cognizant reported 35 per cent (19 per cent) and LTI 20.4 per cent (12.2 per cent).

TCS’ attrition increased to 17.4 per cent in March 22 quater (7.2 per cent). Rajesh Gopinathan, CEO and MD, TCS, told analysts, “we think that attrition will flat line and then start tapering”.

Analyst Stanton Jones of ISG feels that the attrition problem may have peaked in December 2021. He compared the two ways to measure and report attrition. First, the Last Twelve Months (LTM) looks at the employees who left a company in the preceding 12 months. This is what most providers report on a quarterly basis. On the other hand, annualised attrition, which very few providers report, provides a point-in-time view of attrition based on the current quarter’s level.

ISG looked at four providers and their recently reported earnings: TCS, Infosys, Mindtree and LTI. Weighted based on their headcount, LTM attrition for this group went up in March quarter from already high levels – up 2.1 per cent for TCS, 2.2 per cent for Infosys, 1.5 per cent for LTI and 1.9 per cent for Mindtree.

However, ISG Index research indicates that annualised attrition for each provider actually declined in March. This drop was a result of a decline in the number of employees who left, and a bigger employee base following record hiring in recent quarters. While it may take another quarter or two for reported LTM numbers to flatten, it does appear that attrition has stabilised (for now), Jones said.

“We are certainly not saying that another rise in attrition is completely ruled out, but we think the annualised attrition metric is strong evidence that providers are starting to reduce attrition from their peak levels,” he said.

Nilanjan Roy, CFO, Infosys, too, feels that attrition should come down in the following year. “The impact that we are seeing now – the impact of putting freshers in – not only by us, but by the entire industry because it was a rotational churn issue across the industry. As the industry puts in freshers, there is a new source of supply across the industry as well,” he told analysts.

Infosys’ attrition reached a high of 27.7 per cent in March ‘22 qtr (10.9 per cent).

Debashis Chatterjee, CEO and MD, Mindtree, says that attrition continues to be an industry-wide issue and expects the situation to gradually stabilise over the next few quarters. “I think it is also important for us to navigate through this, in terms of whatever we need to do,” he said.

Attrition for Mindtree in March ‘22 quarter was 23.8 per cent (12.1 per cent).

Kamal Karanth, Co-Founder, Xpheno - A specialist staffing company, says record high attrition figures across marquee tech enterprises indicates a 'great talent reshuffle' that's underway.

Sensing a return of normalcy around the corner, talent is now in a bigger rush to make hay while the sun is still shining! Tech talent looks like being out on a panic shopping spree for the best end-of-season deals. Enterprises should hence prepare more headroom and resources to deal with higher attrition rates in the quarters to come, he said.

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