What Wipro is doing right to ease attrition issues — other IT firms might want to take notes

Tech giants Wipro, Tata Consultancy Services (TCS), HCL Technologies and Mindtree hired between 3,400 to over 15,000 employees in the first quarter of this fiscal but only one of them was able to bring down its attrition rate —  the number of people exiting the firms.

Wipro managed to reduce its attrition rate marginally to 23.3 percent in the April to June 2022 period from 23.8 percent in the previous quarter — thanks to quarterly promotions, flexibility and salary hikes among other measures. However, the company’s attrition rate was much higher when compared to 15.5 percent during the corresponding quarter last year.

The Bengaluru-based IT firm had earlier announced it was switching to a quarterly promotion cycle, effective July salary and increases for those eligible in September 2022. The moves seem to have worked as it expects attrition rates to drop further in the July to September quarter.

“We are guiding that in Q2 as well we will see a further drop. So it will be three quarters in a row where we are seeing contraction in attrition and this is driven by a number of factors in terms of growth, opportunities, promotions, rotation, the technology people are working on, the environment in which we are, the flexibility they have, their belongingness to the organisation,” Saurabh Govil, Wipro’s Chief Human Resources Officer told CNBC-TV18.

He said, all such factors come into play for an employee and the firm hopes to continue with the strength over the coming quarters as it also sees green shoots of stabilisation as far as the macro environment is concerned.

Govil’s remarks come at a time elevated employee costs have been troubling Wipro’s tech peers and eating into their margins despite high demand.

For instance, TCS added 14,136 employees to its workforce in the quarter under review but its attrition rate during the period jumped to nearly 20 percent. Milind Lakkad, TCS’ Chief HR Officer, meanwhile said, following the annual compensation review, employees received salary increases of 5 to 8 percent with top performers getting even more significant hikes.

However, in the April to June 2022 period, TCS' net profit declined 4.5 percent compared to the previous quarter as employee costs and high attrition led the margin to shrink.

HCL Tech too brought in 6,023 freshers during the quarter while its net hiring during the period stood at 2,089. However, its attrition rate rose to 23.8 percent compared to the March quarter when it was 21.9 percent. On a year-on-year basis, HCL Tech's attrition level has risen by 12 percentage points from 11.8 percent in the first quarter of the 2021-2022 fiscal.

The attrition rate at Mindtree also worsened to 24.5 percent in the three-month period, from 23.8 percent in the March quarter even as it hired 3,400 people for the quarter ending June 2021, its highest in a quarter.

In addition to ramping up hiring to cater to growing demand, Mindtree is looking at the second round of hikes up to the mid-management level, the company's CEO Debashis Chatterjee said after the quarterly results.

Meanwhile, a report in May said that Infosys also offered its employees massive hikes, promotions and bonuses. The company plans to offer an average rise of 12-13 percent to its employees in India, a Mint report said, adding that the tech firm will also give high-potential employees a hike up to 20-25 percent including a retention bonus.

Infosys is offering its top performers better roles and opportunities to learn new skills like Artificial Intelligence (AI) and machine learning (ML), it said.

Whether Infosys’ move will result in a lower attrition rate remains to be seen as the company is due to report its financial results for the April to June 2022 quarter on Sunday.

In a research note earlier, ICICI Direct had said attrition across companies would continue to be high and, hence, cost to backfill attrition (at higher costs) and costs related to retention, bonus, rationalisation of compensations are expected to put pressure on margins.

While recruitment in the IT sector which was on a roll for the past two years has started to show early signals of slowing, thanks, especially to startups, analysts expect the trend of shrinking tech margins to continue going forward, despite robust demand for technology across other sectors.

Meanwhile, Siva Prasad Nanduri, Chief Business Officer at TeamLease Digital, told CNBCTV18.com "Currently, we are seeing an attrition rate of around 35-49 percent QoQ. However, the current quarter looks to be stable and we are anticipating the pattern to be around 20 percent for Q2 for FY23."

According to him, to bring down attrition levels further, organisations are relooking back-to-office calls and making hybrid as their work portfolio and are also upskilling and reskilling employees with respective wage corrections wherever needed.

Nanduri said the overall hiring intent looks very positive and the demand in the current quarter is more than the first quarter and is expected to continue.

In a separate interview with CNBC-TV18, TeamLease Services’ Chief Financial Officer Ramani Dathi had earlier said, “there are early signals of a slowing hiring trend but for this quarter, we are not seeing any impact in terms of the number of open positions in the IT industry.”