Top IT firms such as Tata Consultancy Services (TCS), Infosys, and Wipro have witnessed a significant rise in their wage bills despite a dip in revenue growth. According to experts, the cumulative wage cost for these companies increased by Rs 18,036 crore in the fiscal year, attributed to ongoing lateral hiring in high-demand areas like artificial intelligence (AI), machine learning (ML), cloud, and engineering services.
In FY24, TCS, Infosys, and Wipro saw their wage costs rise by more than 5.5% on average compared to the previous year, even as their year-on-year revenue growth slowed to an average of 3.6%. This increase in wage costs was driven by continued lateral hiring in areas of growth and salary increments, albeit in the lower single digits.
Analysts note that the high attrition and demand during the Covid-19 pandemic have led to a higher wage base, posing challenges for IT companies looking to normalize their wage bills. Companies are still hiring resources in high-demand areas at significant hikes, with wage levels remaining high due to the strong demand for skills in AI, cloud, and engineering services.
TCS, with over 600,000 employees, reported a 9.5% y-o-y increase in its wage bill, while Infosys and Wipro saw jumps of 5% and 2.4%, respectively. Despite facing negative to flat growth in recent quarters, these top IT companies are focusing on lateral hiring in key growth areas to drive their businesses forward.
While TCS has already announced salary increments ranging from 4.5% to 7% starting in April, Infosys and Wipro are yet to disclose their numbers for appraisals and fresher hiring. The companies are also grappling with lower attrition rates, which are prolonging the process of normalizing wage bills.
Experts believe that the IT companies are still dealing with the impacts of excessive hiring during the Covid era, resulting in sustained high wage levels. However, margins remain favorable for these companies due to reduced onsite expenses and cost optimization strategies.
Despite the challenges posed by rising wage costs, TCS and Wipro saw improvements in their operating margins in FY24, while Infosys’ margins remained within its guidance range. TCS witnessed a decline in headcount but an increase in employee benefit expenses, reflecting the ongoing efforts to sustain growth amid changing market conditions.
Overall, the IT industry continues to navigate the complexities of balancing wage costs, talent acquisition, and revenue growth, with a focus on adapting to the evolving landscape of technological advancements and market demands.
