The top three information technology companies reported higher staff cost for the fiscal ended March 31, 2011, over the previous year mainly due to wage increase. However, as a percentage of revenue, the staff cost was more or less constant in fiscal 2011 compared with the previous year.

Wage inflation is catching up and there was a large round of lateral hiring late last calendar year that took place at a premium even as firms began to prepare for the post-recession recovery in demand, said Mr Sid Pai, Partner and Managing Director, TPI India Advisory Services (P) Ltd, a consultancy firm.

In fiscal 2011, the top three companies added 55,540 employees with TCS taking a major chunk of 38,185 employees, followed by Wipro with 14,314 and Infosys 3,041 people.

TCS ended the fiscal with a total headcount of 1,98,614 (1,60,429). Naturally, the total employee cost went up proportionally. Secondly, TCS gave a wage hike of 13 per cent in India and 2-4 per cent at onsite locations, said a company spokesperson.

However, when employee cost is looked at as a percentage of revenue the increase is ‘very' small. It went up from 35.9 per cent in fiscal 2010 to 36.19 per cent in fiscal 2011 — a 29 basis-points increase. Therefore, the margin impact of the increased employee cost was minimal, he said.

According to Mr Arup Roy, Principal Research Analyst, Gartner, the average salary increase of around 18 per cent added to the cost element for the top companies. Further, the employee churn rate of nearly 21 per cent added to the cost of hiring new people, who need to be trained as well.

Mr Roy said to reduce staff cost companies need to offer clients higher value advisory and vertical-specific services, and intellectual property-related services. They should also leverage alternative delivery models such as Cloud computing and Software-as-a-Service.

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