India's top two software services companies each added more employees on a net basis in the January to March quarter than they often have in past full years. Ironically, the employee churn numbers are also at their highest ever.
Tata Consultancy Services Ltd. saw an all-time high net addition of 35,209 in the quarter and its annual highest of 1,03,546—taking total headcount to 5,92,195.
Infosys Ltd. added net 21,948 employees in the quarter and 85,000 over FY22—taking headcount to a total 3,14,015.
Both companies have said they intend to keep up the hiring momentum.
TCS intends to add 40,000 freshers in FY23, said NG Subramaniam, the company's chief operating officer in the post-earnings analyst call. It set a similar goal at the start of last fiscal but far exceeded it.
Infosys plans to hire upwards of 50,000 employees in FY23, said Chief Financial Officer Nilanjan Roy when announcing the quarterly earnings.
These record additions come on the back of rising demand for digital services, spurred on by the pandemic. Deal momentum has led to record revenue addition at both companies in the past year.
The blistering growth has also prompted a fight for talent across IT services companies, leading to record attrition.
At Infosys, close to a third of all employees left their jobs last year. The last quarter was the worst with annualised attrition at 27.7% versus 25.5% in the quarter ended December 2021. That compares with 15.2% at the end of in FY21.
TCS fared better than its smaller peer but also saw close to a fifth of its employees churn - with annualised attrition rate at 17.4% in the March quarter versus annualised attrition at 15.3% in the preceding quarter and 8.6% in FY21.
Both companies have warned that attrition, on a last-12 month basis (LTM) will rise over the next two quarters before tapering off.
What we’re seeing is a demand-supply mismatch in our industry, said Rajesh Gopinathan, chief executive and managing director at TCS, in the post-earnings analyst call.
"Fresher hiring and productive use of freshers is a long-cycle activity. But you have seen the industry step-up hiring over the last four quarters. We expect that as that supply hits productive use, that will ease up a lot of what was going on over the last few quarters. So, that’s why when we say that as we look forward two quarters ahead, we think that attrition will flat line and then start tapering."
Yet, both companies have had to replace 1.9 lakh employees in the last year even while substantially adding to headcount to capture the increase in demand.
Global peer Accenture also reported 18% attrition on a trailing basis for the quarter ended February making this an across borders industry wide challenge.
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