IT Services Sector Plans To Cut 5% Of BFSI Workforce

More layoffs are on the anvil. “We believe a 5% to 10% headcount drop in BFSI-focused teams could be triggered to get through the stress of a larger BFSI shake-up. The next few weeks are critical to see if the BFSI shake-up will trigger the next wave of layoffs in the Indian IT sector," Karanth said.

The recent turmoil among western banks has prompted concerns about a possible fallout affecting local banks. However, the Reserve Bank of India and industry experts have said the Indian banks are tightly regulated, and chances of a similar meltdown are unlikely.

Top IT companies such as Tata Consultancy Services, Infosys, Wipro and HCL Tech are still facing high employee costs, despite a decline in overall headcount. Despite the sequential drop (56.2% in the September quarter to 55.1% in the December quarter), wage costs as a share of revenue are still higher than in the same quarter a year ago.

In January, Mint reported that in the first half of the year, about 15,000-20,000 employees may be retrenched from the Indian tech and startup sectors; however, that number is expected to increase as the slowdown in advanced economies is expected to continue till September. “Involuntary attrition will go up by 5-7 percentage points in the next three months. The number of campus hires will go down. The next two quarters will be very choppy, and even the expected salary hikes will get subdued," said Aditya Narayan Mishra, chief executive of Ciel HR Services. Those who are on the bench and yet to turn billable may be the most vulnerable to retrenchments. This will include a large chunk of campus hires who get trained before being put on projects.

“Order inventory is getting impacted, and IT services firms need to improve their margins and operating expenses. While layoffs will happen across profiles, those on the bench will be first to let go," said Akshara Bassi, senior analyst at Counterpoint Research.

Manpower is one of the highest cost areas of an IT services company. Concerns have increased after Accenture, the world’s largest technology services company, prepares to let go of 19,000 people or 2.5% of its global workforce, in the next 18 months.

With this, Accenture joins the ranks of Big Tech companies, including Alphabet, Amazon, Meta and Microsoft, which have announced a combined 70,000 job cuts since January amid fears that a global recession will affect growth.