Tuesday, May 21, 2024

IT sector to see lowest hikes in 10 yrs: Deloitte

MUMBAI : The average pay hike across Indian companies is estimated to slip to 9.1% this year from 9.4% last, with the IT sector facing spending cuts by clients seeing the worst hikes in a decade. According to a study done by audit and consulting firm Deloitte India, the impact of recession in advanced economies will bring attrition in the IT industry to pre-covid levels of 15-16% from last year’s 19.7%.

“The IT sector is estimated to get the lowest hike of a decade led by IT product firms and digital e-commerce companies,” said Anandorup Ghose, partner, Deloitte India. Its India Talent Outlook 2023 estimates pay hikes in IT segment at 9.1%, compared with the actual 10.3% hike of last year. The projected hikes for IT were 10.5% in 2022 and about a decade back, the hike used to be 10%.

Graphic: Mint

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Graphic: Mint

After almost a year of hiring frenzy buoyed by strong demand for IT professionals across industries, the sector is facing the heat of a crunch at its global clients and a large banking crisis in the west. Many large foreign tech companies have laid off large numbers of employees, claiming they had “over-hired”. The domino effect is felt in the Indian tech sector as well.

The Deloitte study, which gathered data largely from HR heads of 300 companies across 25 sectors, showed that the Life Sciences and Manufacturing sectors will see the highest increments in 2023. Both are expected to roll out hikes of 9.5% versus an actual increment of 9.7% last year.

The Life Sciences industry remained largely unaffected during the pandemic and remains unimpacted by the economic downturn, Ghose said in an interview.

The Deloitte study also showed India Inc.’s lack of visibility of skill sets that are needed to change business models or move up the ladder.

About 42% of organizations do not revise their framework regularly to contextualize it to changing business requirements. While certain industries like IT and IT services have defined how to upgrade their workforce, in other industries, such capabilities are learnt on the job and not well-defined. Ghose said this could pose a challenge when companies want to change their business models like they did after the pandemic, as there was there was a demand and supply gap in talent.

Only 19% of organizations—mostly in the IT, ITeS, and Consumer sectors—confirmed that their employees have visibility of skills beyond their current role. “The study showed that more than more than 80% of organizations reported that leadership teams have no structured data or reporting mechanisms to understand the current skill capital,” the report stated.

Meanwhile, recessionary waves are expected to bring down attrition levels to the levels of 2019 and early 2020. “In the high-growth sectors that were actively hiring, we see a distinct slowdown in new investments and business,” said Ghose. Attrition is expected to be in the 15-16% range compared to 19.7% in 2022 and 19.4% in 2021.

Artificial Intelligence (AI) and Machine Learning (ML) based analytical tools are getting used to improve talent management. Manufacturing and IT sectors emerged as the biggest investors in HR Tech in 2022, and 3.8% of the total employee cost is budgeted for HR technology enhancements in most organizations.

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