Hiring by IT firms may only be marginally better next year
The Indian IT industry has gone through a lot of churns in the human resources space this year. After two record years of hiring post-pandemic, this has been a tough year for IT engineers. Firstly, fresher hiring has been lower than the pre-pandemic year. Many large and mid-tier firms skipped campus placement season in 2023. Many freshers, who received offer letters last year, are yet to get joining dates as many companies have been putting the decision on hold. Even experienced staffers have been going through turbulent times.
Though the industry has not seen any mass layoffs like in the startup ecosystem, opportunities have shrunk significantly during the year. Many companies deliberately don’t backfill the vacant positions for lateral employees. Even, some bit of involuntary attrition has also been seen. With less opportunities in the market coupled with the subdued demand environment, salary and increments cooled down significantly.
Gone are those days when IT firms were chasing employees with 100 per cent pay hikes. Many mid-tier IT firms have effectively put an end to their increment cycle, while large firms have been delaying increments. Even worse, only single-digit hikes were given this year as compared to the double-digit hikes doled out in previous years. Meanwhile, not only freshers and mid-level employees, even top executives made a move during the year. Infosys, Wipro, TCS, Cognizant and Tech Mahindra, among others, have reported top level shifts, including the CEO and CFO positions. As we approach 2024, many experts are less sanguine about the prospects of hiring.
Demand environment is unlikely to improve significantly in the first two quarters of next year. IT spending in key geographies like the US and Europe remains tepid and there is no indication that macroeconomic environment is likely to improve rapidly in the coming quarters. With startups still reeling under the funding winter, opportunities for IT engineers are not expected to improve in 2024. Most IT firms are suffering from the spectre of over-hiring. They are desperately trying to optimize their employee pyramids to protect margins by saving on costs. This is unlikely to change next year.
Similarly, every downturn prompts companies to take cash conservation measures. Therefore, IT firms will not dole out much salary increments or bonus payouts. Amid such a gloomy environment, there are flickers of hope. Firstly, the US Federal Reserve has indicated three interest rate reductions next year. Hopefully, this will encourage their enterprises to increase their IT budgets as more money comes to their hands. Similarly, after an agonizing lull, startups are witnessing a small uptick in fund flow from PE and VC funds.
Though there is no indication of any improvement in Europe, things are likely to stay at least at the 2023 level. These factors reflect a cautious optimism for the IT sector performance for 2024, though most improvements are likely to happen only during the second half of the year.
