IT attrition rate dips to three-year low

Source: The Economic Times
BANGALORE: Attrition rates in Indian IT have reached levels not seen since 2006. This is partly because the number of new jobs being created has dropped, and partly because even when new jobs are available, companies are preferring freshers over experienced employees, who are more expensive.

For Wipro, the attrition rate has come down from as high as 20% two years ago, to 12%. For Infosys, the rate is down from 13.7% in the first quarter of 2007-08 to 11.8% in the last quarter. TCS has seen a percentage point decline in the rate between the first quarter of this year and the third quarter.

Wipro says the sharp decline in its attrition rate (employees quitting in a period as a percentage of the average number of employees in the period) is a result of both market conditions and the internal measures they have taken . "With more focus on employees and monitoring, our retention has gone up," says Pratik Kumar, GM, HR, in Wipro Technologies.

He says there is still some hiring happening in the industry which is why the attrition rates are still over 10%. "But all indications are that the rates will drop further," he adds. Apurva Shah, head of research at Prabhudas Lilladher, says attrition depends on how a sector is performing and "currently opportunities in the IT sector are muted".

"The attrition rate is coming down over the last three quarters as employees don't have much choice. IT services companies are fighting invariably for people or business. Earlier it was people, now it's business," he says.

Industry experts say that one reason for attrition levels still being in double digits is that companies have been quietly laying off employees, mainly their poor performers. Background checks and performance analysis have become stricter than ever before.

Companies are seen to be applying stricter norms for training appraisal. Infosys, for instance, requires its employees to take a test after their training, which is now harder to clear than before. Currently about 15% to 20% trainees are not clearing the tests, which was earlier 3% to 4%.

Companies are also under huge pressure to cut the bench size (those sitting without any projects to work on). This is expected to lead to bigger layoffs in the months to come. So some think attrition rates will either go up slightly or remain flat at least till the third quarter of fiscal 2009-10.

"Post that, attrition rates will slip to lower single digits as people will be compelled to hold on to their jobs," says Mamtha Jain, a Mumbai-based HR expert.