Tepid IT hiring likely as slowdown looms

Update: 2023-05-03 05:42 IST

Tepid IT hiring likely as slowdown looms

Hiring scene in the Indian technology industry and startup space provide no signs of respite yet. While startups continue to lay off staffers in their bid to reduce cost, hiring activity in the IT industry has gone tepid.

During the January-March period of 2023, startups laid off around 9,400 employees. Byju’s, Unacademy, ShareChat, MyGate and GoMechanic fired a significant number of employees during this period. Dunzo, Innovaccer and Ola were the other marquee startups that laid-off team members. All projections indicate that there is no let-off from the current trends in the first two quarters of the ongoing fiscal year.

Meanwhile, the IT industry had lent its support by hiring engineers in record numbers. In FY22, the Indian IT industry created about five lakh jobs with a majority of the hiring happening in the engineering space.

Hiring in FY23 stood at more than 2.8 lakh.

However, third and fourth quarter results of Indian IT firms had already shown the fault lines in the hiring space. Many top-tier IT firms not only slowed down their hiring pace, some even reported a fall in total headcount.

Signs for FY24 are not that encouraging, either. Most IT firms are currently struggling with high bench strength. It is a fixed cost for IT firms without getting any productive output from such employees. The record hiring and concurrent slowdown in demand have led to such situation. As bench strength has increased, it has pulled down the employee utilisation levels and revenue per employee. In effect, most IT firms have turned cautious in terms of adding new employees. So, the first half of FY24 is likely to be the time when many readjustments in terms of manpower planning are likely to happen. In this scenario, freshers are expected to be the biggest losers. In 2022 and 2023, a record number of fresher hiring had happened, bringing cheers to new engineering graduates and engineering colleges. However, 2023 will be the period when many IT firms are likely to skip campus placement all together. Wipro has already indicated so as it has the required number of employees to execute new projects.

So, when hiring in both startups and IT industry is likely to be tepid, 2023 may not be a year of high employee addition. Rather, recruitment firms have said that hiring activity is down by around 40 per cent in the first quarter of 2023. However, most industry experts have opined that green shoots will emerge from October. Some optimism is already visible. After firing staffers, SAP India has said that it would add around 1,000 employees this year.

So, one should expect some momentum coming back in the second half of this year. 

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