Why More Employees are Quitting TCS Now Than Ever Before

More employees are leaving Tata Consultancy Services – India’s biggest employer in the private sector – than ever before, according to the latest data. Over 15,000 employees quit TCS, the country’s biggest outsourcer, in the three months to June 30, 2015.

According to company data, TCS hired 20,302 employees in the June quarter, but net additions stood at 5,279. As of June 30, 2015, the total number of employees in TCS stood at 3,24,935.

“Attrition rate for the quarter was 15.9 per cent, which is 100 basis points higher compared to the previous quarter and likely the highest ever,” said Nirmal Bang Securities.

TCS chief executive and managing director N Chandrasekaran said there were “multiple factors” why a large number of employees are leaving the company.

TCS attributed the rising attrition to the following factors:

1) Seasonality: Some employees quit in June-July to pursue higher courses such as MS, MBA, etc..

2) Scale: TCS is now in the league of global tech giants, and it employs thousands of people outside India. The growing scale in geographies such as Latin America has also added to overall attrition. TCS employs over 14,000 people in Latin America, Mr Chandrasekaran said, and attrition there is higher than in India, which skews the larger picture.

“Attrition rate was higher in business process services division and in Latin America,” said Girish Pai of Nirmal Bang.

3) More opportunities: The demand environment is stronger than before, especially when compared to last 3-4 years, Mr Chandrasekaran said. This means the job market for IT employees is growing, which leads to poaching of employees. This contributes to attrition.

4) Lag effect: “In India I think broadly it (attrition) is okay, but it is higher than what you have been used to. So we just need to get that under control and to some extent we’ve got to worry about the lag effect. So we need to look at them,” said TCS global HR head Ajoy Mukherjeein an earnings call on Thursday.

5) In the employee pyramid, there was strong attrition in the range of 3-6 years, which has been the trend over the years. Analysts say employees falling under this category are currently in high demand with a lot of start-ups mushrooming around the country.

The exodus in TCS comes despite the company announcing a Rs 2,628-crore bonus for its employees in the March quarter. Mr Mukherjee had earlier said that the bonus payout will help contain high attrition in the company, but this doesn’t seem to be working.

Higher attrition causes pressure on execution and therefore analysts are worried. Analysts from UBS, Edelweiss and SBICap Securities asked pointed questions to the TCS management about the worsening attrition rate in the earnings call held yesterday.

HowIndiaLives, a search engine for public data on India, termed the attrition rate in TCS as an “HR nightmare”.

TCS Vs Competitors

Like TCS, other outsourcers are also struggling with high attrition. TCS closest competitor in India – Infosys – reported a record high annualized attrition of 20.4 per cent in the December quarter. Infosys managed to bring it down to 18.9 per cent in the March quarter.

What TCS is doing to control attrition?

In its annual report, TCS highlighted rising attrition as a “key risk” and said it could impact growth. TCS said employee engagement continues to be a focus area; it added that the company has increased focus on training employees in new technologies and is rotating work assignments to mitigate the growing risk of attrition.