IT major Tata Consultancy Services reported net addition of 821 employees in headcount in the fourth quarter (Q4) of FY23 from 613,974 in Q3FY23. Further, the headcount rose 22,600 from 592,195 in the year-ago period.

This comes as India’s largest software exporter had a drop of 2,197 employees sequentially in Q3.

Voluntary attrition for the quarter stood at 20.1% compared with 21.3% last quarter and the company said further improvements in the metric would be seen going forward. This comes at a time when the company had said that high talent costs were weighing down on margins over the past four quarters.

Company executives had said the drop in its overall headcount sequentially, was on account of aggressive hiring over the last fiscal and was not a reflection of overall demand receding. In Q2FY23, TCS recorded a net addition of 9,840 employees.

Further, the company last reported a dip in headcount by almost 4,800 employees during the first quarter of FY21, at the peak of the Covid-19 pandemic. During its Q2 earnings results for the quarter ended in February, global IT major Accenture reported a headcount growth of just 424 apart from announcing layoffs of around 19,000 employees over the next two quarters.

Overall fall in IT hiring

ET reported on March 27 that the net hiring of engineers by Indian IT companies is likely to crash by close to half year on year in the next fiscal amidst rising caution among companies.

Staffing firm TeamLease expects a 40% drop in FY24 headcount addition vis a vis FY23 addition, based on the current outlook from companies.

“So far in FY23, there has been a net headcount addition of about 280,000 (across the IT sector) and Q4 addition is likely to remain flat,” said Sunil C, CEO of TeamLease Digital. “In recent quarters, attrition has gone down and growth visibility has also reduced. So, we would expect a 30%-40% drop on FY24 headcount addition based on the current outlook.”

This outlook could change six months down the line if companies change their growth forecasts, he added.

IT companies had reported record hiring and attrition numbers during FY22 and in the first half of fiscal 2023. However, as inflationary pressures and the war-led energy crisis in Europe deepened, talent demand spiralled downwards.

In addition, ET had reported on January 18 that India’s top four software exporters — Tata Consultancy Services, Infosys, HCL Tech, and Wipro — together recorded a net addition of 1,940 employees in the quarter that ended December 2022, the lowest in 11 quarters, as demand for technology services slows amid global macroeconomic uncertainty and geopolitical concerns.

The decline marked a sharp drop of nearly 97% from the net addition of 61,137 employees by the big four IT firms in the third quarter of FY22 when they competed aggressively for talent to meet the rising demand for digitisation triggered by the pandemic. There was also a nearly 94% drop from a net addition of 28,836 in the second quarter of FY23.

Correction in salary hikes

ET reported on April 5 that salary hikes in FY24 will take a hit after companies saw employee costs soaring in the last fiscal, according to HR experts who expect 8-10% hikes compared to 10-11% hikes seen last year.

The majority of the employees are expected to get the lower end of the range with stringent checks on contribution to the business, experts added.

With the great resignation phase of 2021-2022 calming down, chairman and regional managing director of Korn Ferry India Navnit Singh expects a wage correction in the market during the FY24 appraisal cycle.

“Due to the great resignation and high demand environment, the level of hikes had gone up. However, this fiscal we expect hikes to remain between 8-10% with the majority of employees expected to get below 10% hikes,” said Singh.

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