Why hiring in IT sector has hit all-time low
The once-booming IT industry is experiencing a hiring slowdown, with gross IT hiring additions in the past 12 months reaching an all-time low of 14%, as per US-based IT analyst firm ISG. This represents a significant drop from the peak of 40% witnessed in the first quarter of 2022 and falls far below the historical average of 21% observed between 2017 and 2019. The drastic decline is primarily attributed to reduced discretionary spending and a global slowdown.
Understanding the factors at play
Companies are becoming more cautious with their budgets in the face of a global economic slowdown. This is leading them to postpone or even cancel non-essential IT projects, resulting in a reduced need for new hires. The global economy is facing several challenges, including rising inflation and interest rates, geopolitical tensions, and supply chain disruptions. This has created an atmosphere of uncertainty and risk aversion, discouraging IT companies from making large investments, including hiring new employees.
The Great Reshuffle and attrition rates
In 2022, the IT services industry saw a "Great Reshuffle," where 40% of employees had been with their company for less than a year. This happened as providers relied on campus-based hiring and subcontractor channels to quickly add entry-level and experienced hires in anticipation of future demand. However, attrition rates have remained stable, with annualized attrition at 14.3%, down from 14.6% in Q2 and below the 2017-2019 average of 15.9%, as reported by ISG.
A shift in IT hiring trends
Krishna Vij, Business Head at TeamLease Digital, an HR firm, calls this situation a "Great Stay," contrasting with the previous "Great Reshuffle." This shift is marked by reduced hiring across all levels as large Indian IT services companies respond to macroeconomic uncertainties and a slowdown in discretionary spending. The industry now focuses on workforce utilization, targeting an employee utilization rate of around 80-85%. This has led to delayed campus recruitment and is impacting opportunities for prospective graduates.
