As costs and attrition bite, companies look at small towns for talent

During November 2022 and April 2023, there has been a 40% jump in recruitment from tier-2/3 cities

Companies are focussing on hiring small-town talent to cut their employee costs, The Times of India (TOI) reported citing a Deloitte India study. A similar trend was registered in companies deciding to set up their research and development centres in tier-2 and tier-3 towns.

Highlighting this shift from tier-1 cities are companies like the industrial engineering bigwig from Germany, Thyssenkrupp, which chose Pune to set up its technology nerve centre to empower its business globally. Another example is CK Birla Group's IT services and consulting arm Birlasoft which opened its first delivery centre in Coimbatore, a city with several engineering colleges.

Companies are hiring talent from tier-2 and tier-3 cities as talent is available at relatively lower costs. The report added that between November 2022 and April 2023, there has been a jump of around 40 per cent in recruitment from tier-2/3 cities.

A salary differential ranging from 19 to 35 per cent has been registered across industries when comparing the salaries of candidates from tier-1 and tier-2 cities, TOI reported. The difference can go as high as 50-60 per cent between tier-1 and tier-3 cities.

Elaborating on the study, director at Deloitte India, Neelesh Gupta, was quoted by TOI as saying that organisations have increased preference to hire candidates from tier 2/3 cities. This is true for both MBA as well as BTech candidates, Gupta added.

Gupta said that the attrition of talent from tier-2/3 is much lower compared to tier-1 talent. He added that companies are carefully evaluating the value proposition of candidates.

Head of technology at Thyssenkrupp, Rohit Gupta said there has been some normalisation in terms of employee costs in metros and non-metros, but there is still a difference of 15-20 per cent, the TOI report added.

The case of Birlasoft was a different one where it wanted to be placed near top talent. Chief people officer at Birlasoft was quoted in the report as saying, "Our focus is on identifying skilled individuals regardless of their location, be it in metros or tier-2 cities."