Staff costs soar for IT majors with greater hiring in US

TE Raja Simhan Chennai | Updated on June 27, 2019 Published on June 26, 2019

The companies were the talent pool across sectors such as IT, construction and engineering, and FMCG.   -  Getty Images/iStockphoto

TCS, Infosys, Wipro have recruited over 25,000 Americans in recent years

Leading IT firms Tata Consultancy Services, Infosys and Wipro witnessed a sharp increase in employee benefit expenses, including salaries and bonuses, in FY19.

This is primarily due to increased hiring in the US: in recent years, the three companies have altogether hired over 25,000 employees there, with the bulk of them coming on board last fiscal.

In FY19, TCS saw an 18 per cent increase in its employee cost, followed by Infosys at 17 per cent and Wipro at 10 per cent.

Offshoring worked earlier because of labour cost arbitrage and challenges with resource availability overseas. Now, though, tax benefits in the US for local hiring and a growing focus there on STEM (science, technology, engineering and mathematics) education are encouraging IT majors to hire more in that country, said Abhishek Singh, Vice-President at research firm Everest Group.



Competitive advantage

TCS has consistently been among the top three IT recruiters in the US over the past few years. “This, and (a high) retention rate, are a source of competitive advantage for the company,” Ajoy Mukherjee, Executive Vice-President and Global Head, Human Resources, TCS, was quoted as saying in a release.

The company ended FY19 with 4,24,285 employees. Over the past five years, it has recruited over 15,000 employees in the US, said a company official.

The story is more or less similar at Infosys, which has hired about 9,100 Americans over the past two years.

Infosys’ localisation effort has been pretty strong, and represents a significant differentiation for the company, its COO Pravin Rao told analysts recently. It ended FY19 with a total of 2,28,123 employees.

Wipro CEO Abidali Z Neemuchwala told analysts it has reached 64 per cent localisation in the US, and has a well established campus hiring programme from universities there.

Higher salaries

Rising wages — in both emerging and mature markets — due to favourable macroeconomic conditions, and a talent shortage, have forced vendors to ‘bump up’ salaries to attract skilled workers, according to Boz Hristov, Professional Services Senior Analyst at Technology Business Research.

A recent ICRA report pointed out that tightened visa norms in the US do not allow Indian IT firms to move entry-level programmers there. Plus, they face increasing compliance and evidence requirements, and fewer H-1B visas. Consequently, they have ramped up hiring in the US.

At 3.35 lakh, the US issued 10 per cent fewer H-1B visas (fresh and renewals) between October 2017 and September 2018, against 3.73 lakh in the previous year period. This is leading to increased onsite hiring, which is associated with higher wage bills, the ICRA report said.

Published on June 26, 2019

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