HCL Tech margin under pressure over talent crunch as Q1 attrition hits 24%

Top management, while reporting results for HCL Tech Q1FY23 on Tuesday, said attrition rate was "expected to remain high in coming months"

The profit margins of HCL Technologies’ service business came under pressure in the quarter ended on June 30, with the attrition rate growing to 23.8 per cent from 21.9 per cent in the preceding quarter. The company’s top management, while reporting results for Q1FY23 on Tuesday, said the attrition rate was “expected to remain high in coming months.”

HCL Technologies has joined other IT majors, including Accenture and Tata Consultancy Services, that recently reported attrition rates nearing 20 percent in the previous quarter. TCS had reported an attrition rate of 19.7 per cent, while that of Accenture’s stood at 20 per cent.

The IT services company reported an EBIT (Earnings Before Interest and Taxes) margin of 17 percent for the quarter. “Margins in the services business are under pressure, mainly due to increased talent costs and transition costs,” HCL Chief Executive Officer C Vijayakumar said.

He added that the company will implement innovative pricing, rate increases, and optimization of operating costs to improve the margins in the coming months.

HCL Tech’s Chief Human Resource Officer Apparao V V said the attrition rate saw a jump of 180 basis points in the quarter. “We are definitely seeing an increased attrition. We will see the heightened attrition to remain more or less the same in the next quarter,” he said.

HCL Tech’s total headcount stood at 210,966 people as of June 30. The IT major added 2,089 staff members between April and June 2022. The growth of headcount was lowered to one-fifth from 11,000 employees added in the previous quarter.

Meanwhile, the company, which had shared a target of hiring more than 30,000-35,000 freshers in FY23, recruited 6,023 freshers this quarter. “We have not lowered the hiring target, it is business-driven,” Apparao said. He added that the company plans to hire 10,400 freshers between July and September 2022.

On the salary hikes, the company said it would be able to inform the details in the coming weeks as the hikes were effective from July 1. HCL conducted almost two million hours of capability training as it upskilled 44,000 employees in the previous year, Apparao