Deja Vu For Indian IT As Fresher Hiring Set To Halve In FY24

Fresher hiring by India’s top-tier IT services firms is set to halve in the current financial year, as slowdown fears grip the wider $250-billion outsourcing industry. 

The last time outsourcers skipped campus hiring was in 2008.

Infosys Ltd. and Wipro Ltd., after their second-quarter earnings, ruled out campus hiring this year. Tata Consultancy Services Ltd. plans to stick to its targeted onboarding of 40,000 freshers, while HCL Technologies Ltd. will honour its commitment of 10,000 hires.

“The figures show that there will be about a 40-50% drop in hiring of freshers in FY24. This means that roughly half-a-lakh fresher jobs will be impacted,” Sunil C, chief executive officer at staffing firm Teamlease Services Ltd., told BQ Prime.

“It has been a trend that top IT firms hired freshers in large volumes year-on-year and spent time and resources on training them. But in FY24, it is expected that most firms are upskilling their current workforce and cutting down their hiring rates for new talent significantly.”

That strategy is showing in the eroding employee base as well.

Headcount of India’s top-tier outsourcers declined by a net 18,112 employees in the quarter ended September, according to earnings statements. Only LTIMindtree Ltd. (794) and Tech Mahindra Ltd. (2,307) clocked net additions. That translates to a nearly 40% decline for the full year, according to NLB Services. In absolute terms, the net hiring by top-tier IT firms has witnessed a drop of at least 2,50,000 in FY24.

But attrition rates have eased to pre-pandemic levels on a trailing 12-month basis. The utilisation levels have improved as employees have returned to office after three years of work from home.

India’s engineering colleges churn out about 15 lakh graduates every year, a tenth of whom join the IT services sector, estimates by staffing firm AdAstra Consultants showed. 

“A smaller subset successfully transitions into pertinent technical roles in the sector,” Nirupama VG, founder and managing director at AdAstra Consultants, told BQ Prime. “This disparity underscores the gap between academic curricula and industry demands, indicating an imperative need for more aligned training and education.”

The decline in headcount comes at a time when Indian outsourcers are bracing for a slowdown—if not a washout—in the financial year ending March 2024, as enterprises in the U.S. and beyond curb technology spending to cope with high interest rates and inflation. 

While Infosys, HCLTech and Wipro have lowered their revenue growth expectations for FY24, TCS has warned of single-digit growth. Tech Mahindra is set for a reorganisation under new Chief Executive Officer Mohit Joshi to claw back some of the operational profitability lost in the first half of fiscal 2024.

Several of these companies—including Infosys, HCLTech and Wipro—deferred salary hikes by a quarter to shore up operational profitability amid uncertain dealmaking.

To be clear, hiring in the technology sector has come off pandemic highs.

In March 2020, stringent lockdowns to control the spread of the novel Coronavirus stalled all but essential services across the world, forcing people to work from home. Workflows had to move online quickly. India’s biggest outsourcers moved equally fast, hiring by the hordes to enable “digital transformation” of clients big and small.

Then, things changed. As the virus outbreak ebbed, a war broke out in Europe.

Enterprises in the U.S.—the biggest market for Indian IT firms—turned cautious on spending, amid spiralling inflation and interest rates. The “digital transformation” overdrive came to a halt. A domino effect is now being seen in hiring trends.

“We have to remember that Covid period was confusing and post-Covid there was massive hiring. And now with global uncertainties, the IT companies are now saying, ‘If we overhired earlier, let’s now leverage every person to our advantage’,” Rajendra Singh Pawar, co-founder and chairman at NIIT Group, told BQ Prime during a post-earnings interaction.

The IT firms are still hiring, make no mistake, just that attrition numbers are higher—precisely the reason why there’s a decline in overall headcount, he said.

A sharp rebound is unlikely as well.

“We expect this drop to be persistent for the whole of FY24,” Teamlease’s Sunil C said. “There are bleak chances of revival given the current geopolitical and economic situation, as well as the advent of AI (artificial intelligence) impacting the jobs market.”

A pickup, if at all it happens, will be very slow.

“Customers have become very circumspect, and have become mindful of spending,” Pawar of NIIT said. “Quite clearly, this has an impact on young people, and their desire to invest in themselves and get ready for the marketplace.”