An IT, ITeS labour conundrum

The top 10 companies account for about 91 per cent of all employment among listed IT and/or ITeS firms and they make 92.4 per cent of all wage payments to them

According to CMIE’s Consumer Pyramids Household Survey (CPHS), information technology (IT) and information technology enabled services (ITeS) together employed 1.78 million people in September 2021. The average for the quarter ended September 2021 was lower at 1.74 million. This is also lower than the average 1.9 million the industry employed in the quarter of June 2021. Emp­loyment in the IT and/or ITeS industry had peaked at 2.23 million in June 2021.

The IT and/or ITeS industry is a small employer. At about 2 million, it accounts for a mere half per cent of the total employment in the country. But, it provides one of the most coveted jobs in the private sector. Demand for IT and/or ITeS professionals from larger companies is on the rise. Companies are reportedly hiring aggressively. But, at the same time, attrition rates have risen. This suggests that much of the hiring by companies is from within the industry. There seems to be a much lower preference for fresh graduates. This could be because of some scepticism regarding the quality of fresh candidates graduating after remote education in the shadow of Covid-19 and stringent lockdowns.

Most of the employment in this industry is provided by some of the best companies in India. Tata Consultancy Ser­vices employs over half a million. It alone accounts for over a quarter of the total estimated employment in this coveted industry. Infosys is a distant second but it is still a very large provider of good quality jobs to nearly 280,000 people. Next, HCL Technologies and Wipro come close with both employing a little short of 200,000. Wipro is a somewhat diversified enterprise and so some of its employment is in non-IT businesses. Wipro also does not provide details of employment like other listed IT companies do. We have estimated employment by the company using its wage bill as a reference point.

All the top IT job providers in India are listed companies. There are some large unlisted IT companies as well, such as Accenture Solutions, Microsoft Corporation, SAP India, etc. While some of them hire in the thousands, none matches the hundreds of thousands hired by the top four IT companies in India mentioned above.

Two databases maintained by CMIE show somewhat comparable employment estimates for IT and/or ITeS companies in India. CPHS estimates that the industry employs about 2 million people. This estimate is drawn from a large household survey. Independent estimates drawn from CMIE’s Pro­wess database indicate that lis­ted IT and/or ITeS companies employ about 1.5 million. This implies that the unlisted companies could be employing about half a million or a little more than that. This is what TCS alone employs.

Indian compan­ies are not very good at providing information on the number of persons they employ. Even listed companies do not provide em­­p­loyment data at a quarterly frequency the way they provide quarterly financial statements. We have used the salary and wage data, which is available at a quarterly frequency for all listed companies, and the emp­loyment data of a se­lect few that provide such data to estimate employment among listed companies in the industry.

There are 300 listed IT and/or ITeS companies in In­dia. Of these, employment data was available for only 10 for the June 2021 quarter. Of these, six are among the top 10 companies and four from the rest. We use this and similar data for earlier quarters along with the total wage bill of individual compan­ies to derive an average wage rate for the top 10 IT and/or ITeS companies and separately for the remaining IT and/or ITeS companies. Us­ing the average wage rates from the select few who provide emp­­l­oyment data and the published total wage bill for individual companies, we estimate the emp­loyment by each company.

The top 10 listed IT and/or ITeS companies are estimated to have employed 1.46 million people in the quarter ended June 2021. The remaining 130 employed only an estimated 0.13 million.

A concrete estimate of the size of the IT and/or ITeS industry is the wage bill as provided by the companies. The total wage bill of all 140 listed companies for which financial statements were available for the quarter ended June 2021 was Rs 536 billion. Of this, the top 10 companies accounted for Rs 495 billion and the remaining 130 made for a meagre Rs 41 billion. The top 10 companies account for about 91 per cent of all employment among listed IT and/or ITeS companies and they make 92.4 per cent of all wage payments to them. Wage rates are higher in the top 10 companies.

The total wage bill of IT and/or ITeS companies shot up by 15 per cent yoy in the quarter ended June 2021. In the preceding four quarters, growth was between 4.7 and 6.3 per cent. The 15 per cent growth of the June 2021 quarter was the best since the December 2018 quarter. Ten companies that have provided data for the quarter ended September 2021 indicate a further acceleration in the wage bill to 17.4 per cent. These are mostly the top companies.

Evidently, the demand for labour from IT and/or ITeS companies shot up in the quarter ended September 2021 but the lack of growth in total employment seen in CPHS in the September 2021 quarter indicates that the larger companies are mostly poaching available human resources. The demand for fresh labour is limited. Smaller companies that are losing human resources are not replenishing them commensurately.

The writer is MD & CEO, CMIE P Ltd