Large-cap IT firms Tata Consultancy Services, HCLTech, and Infosys saw a five-year dip in net employee additions as global curbs on discretionary tech spending compelled firms to pair down their bench. In the second quarter of FY24, the net additions to headcount were not only in the red; firms were reporting the largest quarterly reduction to their headcount in the last five years.
As TCS warns of continued weakness in tech spending in the US, which contributes to nearly half of its revenues, the firm reported a negative net addition of 6,333 employees to its total headcount in Q2FY24. Infosys, which has been reducing its headcount for the past three quarters, saw its bench strength reduced by another 7,530 employees. HCL Tech saw a negative net addition of 2,299 to its headcount in the same quarter.
While these are the largest quarterly reductions that the IT firms have reported to their overall headcount since FY18, this trend has been going on for at least a year. Till the end of FY22, IT firms continued to hire in massive droves to keep up with the pandemic-induced increase in tech spending around the globe. Now firms are not only pairing down their bench sizes, but they have been hit with a prolonged season of tough macroeconomic conditions as well as technologies like AI that reduce the need for large bench sizes.
As IT companies see their clients pause or defer projects, Tier-1 firms are increasingly relying on internally deploying talent for projects instead of hiring more in an attempt to improve employee utilisation. Strategies such as mandatory work from office have also been re-emphasised in a bid to boost efficiency.
However, TCS CHRO, Milind Lakkad says that business demand and business situation should not be related to the degrowth in headcount. “People coming in for the last 18 months are getting leveraged now in the past year,” he said at the Q2FY24 press meet.
Experts predict that net headcount additions are projected to remain negative for the second half of FY24 as well, as top IT firms continue to reduce hiring in the current economic landscape.
Krishna Vij, Business Head of IT Staffing at TeamLease, said, “Overall hiring sentiments are significantly impacted by the current geopolitical and macroeconomic situation, contributing to a challenging hiring landscape. The uncertainties surrounding the future, coupled with various other factors beyond the macroeconomic scenario, further compound the hiring outlook.”
“Notably, fresher hiring is already affected due to lower intakes announced by the majority of IT organizations. It is anticipated that there will be a substantial reduction of 40–50 per cent in the overall intake of freshers across the IT sector. This reduction is expected to affect the last year’s batch and the current year’s batch,” she added.