IT hiring hits new low of 14% in last 12 months

As IT companies slowed down their hirings in the last few months due to a pullback in discretionary spending and global slowdown, the last 12-month gross IT hiring addition witnessed an all-time low of 14 per cent, down from a peak of 40 per cent in 1Q22 and significantly below the 2017-2019 average of 21 per cent, according to ISG, a US-based IT analyst firm.

Service providers continue to delay hiring especially at the entry levels while attrition remains stable. This means, the percentage of employees that started at their firm within the last 12 months is now at the same point it was during the lowest point of the pandemic.

Great reshuffle

Before the pandemic, many providers relied heavily on campus-based hiring to add entry-level capacity in anticipation of future demand. And during the post-pandemic boom, providers also turned to the subcontractor channel – and to competitors – to quickly add experienced lateral hires.

When these two hiring engines came together in the middle of 2022, it resulted in something that had never happened in the industry - 40 per cent of the IT services workforce had been at their company for less than a year. “This is what we called the Great Reshuffle,” the firm said.

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However, in the last one year, with the macro-driven pullback in discretionary spending, IT services growth has softened. Attrition has remained relatively stable for most providers, below post-pandemic highs and comparable to pre-pandemic levels. The industry responded by significantly slowing hiring across all levels of the workforce. This has resulted in a complete reversal of the Great Reshuffle. Today, 14 per cent of the IT services workforce was hired within the last year. That’s as low as the lows of the pandemic quarters of 2020.

Attrition rate

Annualised attrition is 14.3 per cent, down from 14.6 per cent in Q2, and below the 2017 - 2019 average of 15.9 per cent, the firm said.

Krishna Vij, Business Head – IT Staffing, TeamLease Digital Pvt Ltd, a HR firm, said the current state of the IT and business services industry reflects a paradigm shift, coined as the “Great Stay” in contrast to the previous “Great Reshuffle.” This shift is marked by a reduction in hiring across all levels, as large IT services companies in India respond to macroeconomic uncertainties and a slowdown in discretionary spending.

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The present scenario indicates a departure from the hiring trends seen in the past, with a decline in new hires contributing significantly to the cooling labour market over the past two years. The industry, facing economic challenges, is prioritising workforce utilisation, aiming for an employee utilisation rate of around 80-85 per cent. This has led to a delay in campus recruitment, impacting opportunities for prospective graduates, she said.

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