New Delhi: IT companies are finding it difficult to retain staff and control costs. Increased hiring has spurred sudden rises in attrition rates and salaries.
In FY06, many IT majors reported increased attrition by 2 per cent.
Kiran Karnik, President, NASSCOM says, "Companies that spend on training tend to have higher attrition because the next person who comes along says 'why should I invest in training? I will just pay the candidate 20 per cent more."
HR managers at software firms say attrition among those with one to three years' experience is normally highest. In Infosys, for example, it was 12.5 per cent to 13 per cent.
And it is not unusual to see a 100-150 per cent rise in salaries in this pool as well.
In the past year, IT companies initiated wage hikes to cope with high attrition. In FY06, the wage bill in the IT industry rose by 41 per cent, while revenues grew 34 per cent.
In an industry, where manpower costs constitute 35 to 40 per cent of revenues, the trend is alarming.
Pratik Kumar, VP-HR, Wipro says, "The salary pressure will mount. This is the season where we will see large scale hiring. And therefore, the noise level around salaries tends to mount."
Besides IT companies are offering other incentives, which inflate costs. Some companies offer summer internships to select students in their second year of college while others promise sabbaticals, scholarships and on-site postings.
According to the India Salary Increase Survey by Hewitt Associates, the IT sector will raise wages by 16 per cent this financial year.
That's the highest in a long time. But companies have little choice in the face of such a scarcity.
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