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It is the attrition rates and not the wage increases that are driving down India’s IT costs

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  • India’s IT sector is in trouble, not just because of recession concerns or smaller deals.
  • The problem is much more internal – it’s the record number of employees leaving them.
  • Despite rising labor costs for employees, an analysis by https://londonbusinessblog.com/ India reveals a rather surprising statistic – read on to find out.

Indian tech company earnings in FY23 got off to what some would call a sobering start. the three giants, TCS, infosys and wipro reported a sequential decline in profits, blamed among other things on wage increases and higher travel costs.

An earlier https://londonbusinessblog.com/ India report highlighted that Indian IT companies have spent up to 62% of their revenue on salaries and wages of their employees, with a total payroll account for FY22 at ₹3 lakh crore.

For context: the Indian government
issued a similar amount for providing fertilizer subsidies, settling Air India’s debts, settling export subsidies and providing four months of free ration to 80 crore ration card holders in the country.

Over the past five years, giants like TCS, Infosys and Wipro have kept their salary outflows at an average of 53-55%, while smaller players like L&T Infotech (LTI) and Mindtree have paid the most, between 60-63%.

Salaries paid in the past yearhttps://londonbusinessblog.com/ India / Flourish

In the first three months of FY23, Indian IT companies spent an average of 57% of their revenues on employee wages, with some companies like Infosys even offering single and double pay increases to their high-performing employees.


Also read:

Infosys Reports Consecutive Decline in Net Profit, But Raises Revenue and Margin Guidance for FY23

Infosys Reports Consecutive Decline in Net Profit, But Raises Revenue and Margin Guidance for FY23

India’s IT sector is in trouble, not just because of recession concerns or smaller deals. The problem is much more internal – it’s the record number of employees leaving them. Despite rising labor costs for employees, an analysis by https://londonbusinessblog.com/ India reveals a rather surprising statistic – read on to find out. Indian tech company earnings in FY23 got off to what some would call a sobering start.

Don’t blame the pay rises

However, scratching the surface of these earnings suggests that it’s not the wage increases that are dragging the earnings down — it’s the attrition and resulting training they need that is to blame.

Indian IT companies have failed to reverse the flow of workers leaving them – TCS, the largest in the group, saw the largest sequential increase in its turnover, while Infosys still had the worst overall rates.

Of the six IT companies that released their numbers, Wipro performed the best, with a churn rate of 23.3% — even that’s high considering the company lost 1 in 4 employees in the past 12 months, reducing the training of 3-4 months are worthless.

To offset this high turnover, Indian IT companies have been busy hiring, and a large proportion of these hires are newbies requiring 3-4 months of training.

Overall, the number of new hires from TCS, Infosys and Wipro was highest at Infosys – headcount increased by 25% year-over-year. Even on a sequential basis, Infosys added the most at 7%.

It is the attrition rates and not the wage increases that are driving down India's IT costs
Number of IT companieshttps://londonbusinessblog.com/ India / Flourish

As a result, average wages have even fallen

In total, these six companies together have almost 15 lakh employees, compared to 12.3 lakh employees a year ago – an increase of almost 22%.

Total employee wages at the end of Q1 FY23 were 67,301 crore, up from ₹55,796 crore a year ago – a growth of nearly 21%.

Wages have not kept pace with inflation – the average wage actually fell from ₹4.54 lakh a year ago to ₹4.5 lakh in Q1 FY23.

It’s not clear how Indian IT companies plan to control churn, but it’s critical for them to improve it, especially at a time when concerns about the recession are beginning to impact their top businesses. and bottom line.

Even the largest Indian IT company is not immune to this as the size of the deals shrinks.

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