The top three Indian IT services firms – Tata Consultancy Services (TCS), Infosys and Wipro – witnessed a workforce reduction for the third consecutive quarter, with a total decline of 16,254 employees, in the third quarter.

This comes as revenue growth remains marred due to macroeconomic headwinds for the significant white collar job providing sector. In a down market, companies have slowed down hiring significantly and are focusing on improving utilisation rates.

In seasonally weak Q3, Infosys headcount reduced by 6,101 employees, Wipro’s headcount dipped by 4,473 employees, and TCS’ headcount dipped by 5,680 employees. Top-tier peer HCL Technologies, however, bucked the trend this quarter as its headcount grew by 3,617 employees.

Reason for the dip

Underscoring the reason for the dip, the Kamal Karanth, Co- Founder of staffing firm Xpheno, said, “q-o-q headcount movement of IT Services in Q3 is typically conservative given that it’s a furlough quarter. Low demand, owing to the holiday season in key client markets, drives a cyclical drop in talent demand. Over and above the cyclical drop, bellwethers are also currently experiencing a lag in revenue recognition from running projects.”

IT majors have flagged that there are no immediate plans to increase employee headcount, rather the focus would be on leveraging the current pool. “Nilanjan Roy, CFO, Infosys in earnings call said, “We have a lot of utilisation headroom as we are still at 83.7 per cent and our comfort range is 84-85 per cent. In addition, we also have the option to hire more trainees on short notice. At this stage, we are not seeing any campus requirements either. Our flexi-hiring model will help inscase of influx in demand.”

Similarly, TCS’ CHRO Milind Lakkad noted that the company’s high investment in hiring made in the past years, is currently being leveraged to drive the business, and does not see the need to hire more employees.

Going forward, the hiring outlook remains bleak. Karanth adds, “The headcount degrowth is also a tactical headcount correction for some bellwethers. Dealing with slow revenue recognition and sustained margin pressures will keep the talent demand low for great part of 2024. If not degrowth, IT Services sector will maintain an overall status quo on headcounts and not load headcounts for capacity expansion.”