IT Firms Tighten Employee Scrutiny Amid High Costs, Thin Margins: Report

IT employees who were hired at exorbitant salaries last year will have to justify it through their performance and contributions, according to analysts as reported by the Economic Times (ET). This comes on the back of worsening margins and a tougher economic environment for the IT sector worldwide.

The salary hikes are also expected to halt this year as companies look to optimise costs and utilise employees to the maximum. Senior employees who have been hired at a premium over the past two years will also face greater scrutiny.

Last year, large IT services organisations hired more technology professionals with 5-12 years of experience, referred to as the middle management layer. They make up 70 per cent of the companies' total workforce.

"This talent was hired at exorbitant salaries, resulting in the middle bulge. In most cases, they were hired at 50–60 per cent higher than normal wages," Sunil Chemmankotil, CEO of TeamLease Digital, told ET. He added that this group has excellent skillsets, and while it may be difficult to replace them, companies must retain them and expect wages to normalise or stabilise over time.

"The middle layer hired at higher wages will be scrutinised and be required to provide results; if attrition occurs in this bucket, it will be replaced by normalised wages," he said.

A boost in IT activity was observed even after the lockdown restrictions were lifted. The IT sector was optimistic about the post-pandemic growth aspects. So, the IT companies hired aggressively. But now, as the margins decline, companies are starting to lay off these employees. These include freshers as well. Infosys recently fired 600 freshers for failing the internal assessment.

Since July 2022, big tech firms like Google, Microsoft, Meta and Amazon have fired almost 200,000 employees, citing cost issues, the ET report stated.

It added that firms are also planning to let go of high-cost resources if they can get a similarly skilled employee at a lower cost.