Recruitment consultants expect fewer hiring mandates in the months ahead and have decided not to enter new businesses for now.

However, even as some IT and startup companies will shed staff to manage costs, others within the same sectors are hiring, too.

“We expect about 20,000 layoffs over the next few quarters. Over the last year, companies faced the fear of missing out on talent hiring and recruited in large numbers and paid them many folds more than inflation and market standards,” said Lohit Bhatia, president of workforce management for recruitment firm Quess Corp.

The cost of maintaining that talent has begun to hurt IT firms and startups, Bhatia added.

In FY23 so far, the two sectors have laid off more than 20,000 employees, including 1,400 in the first two weeks of January. Many IT product and services firms, edtechs and fintechs are struggling after the over-hiring of pandemic years, when they snapped up talent at steep salaries assuming continued growth.

Today, pressure from investors, an expected global recession and the domino impact of global layoffs have combined to result in staff cuts. Last week, Google fired 12,000 employees, joining tech giants such as Meta, Amazon and Microsoft, which have laid off 11,000, 18,000 and 11,000 workers, respectively.

“Fifteen thousand employees will get retrenched over the next six months, but this will be the last leg of the recession. However, there are skilled employees who are getting absorbed into the industry. Attrition in many of the product or IT service firms are upwards of 15%, which means despite layoffs, there is room for lateral hirings,” said Kamal Karanth, co-founder of Xpheno, which specializes in technology and startup hiring.

IT services companies such as Tata Consultancy Services Ltd, Infosys Ltd, Wipro Ltd and HCL Tech face high employee costs, even though overall headcount has fallen.

The impact is mostly on junior and middle-level employees, but search firms in charge of senior hiring in tech and startup sectors said leadership hiring had slowed as well.

“There are a couple of cases where the decision-making is getting delayed, but that’s about it. In fact, as a side effect of this retrenchment news, clients have raised their expectations, imagining that a lot of talent is now available,” said Amit Agarwal, managing director, Singapore and India, Stanton Chase. “However, the matter of fact is companies are not letting go of their key talent or high performers at the top. So, the battle for leadership only intensifies,” he added.

Rituparna Chakraborty, co-founder and executive director of TeamLease Services, expects employers to remain cautious for at least the first quarter of the new fiscal. “IT hiring has gone down, and there is tepidness in the market,” Chakraborty said.