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    Mid-level IT staff hired at expensive salaries face higher scrutiny as firms tighten belt

    Synopsis

    Salary increases will be muted this year as companies try to optimise costs and better utilise employees amid macroeconomic headwinds and geopolitical concerns. Senior employees who have been hired at a premium over the past two years will also face greater scrutiny.

    Salesforce to layoff 10% of employees, close some of its officesETtech
    Mid-level employees hired at exorbitant salaries in IT companies will have to justify their performance and contribution to margins in a tougher economic environment, analysts have said.

    Salary increases will be muted this year as companies try to optimise costs and better utilise employees amid macroeconomic headwinds and geopolitical concerns. Senior employees who have been hired at a premium over the past two years will also face greater scrutiny.

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    Last year, large IT services organisations hired a greater number of technology professionals with 5-12 years’ experience, referred to as the middle management layer, which comprise 70% of the workforce, said Sunil Chemmankotil, CEO of TeamLease Digital.

    “This talent was hired at exorbitant salaries, resulting in the middle bulge. In most cases, they were hired at 50%-60% higher than normal wages,” Chemmankotil said.

    This group has excellent skillsets, and while it may be difficult to replace them, companies must retain them and expect wages to normalize or stabilize over time, he added.

    “The middle layer hired at higher wages will definitely be scrutinised and be required to provide results; if attrition occurs in this bucket, it will be replaced by normalised wages,” he said.

    Tech firms across the world are evaluating employee costs after almost 18 months of historically high talent demand.

    Since July 2022, Big Tech firms like Google, Microsoft, Meta and Amazon, among others, have fired almost 200,000 employees, citing cost issues.

    During their third quarter results, the top IT services providers said they would prioritise internal cost optimisation solutions over the next few quarters to boost margin recovery.

    Layoffs in 2023: these companies have announced job cuts amid economic downturn

    The cost optimisation drive is expected to be led by freshers becoming productive over the next few quarters. The top-tier companies reported a dip in attrition numbers, which had peaked during the first half of the ongoing fiscal year.

    Tata Consultancy Services, Wipro and Tech Mahindra reported a slight dip in employee headcount.

    IT staffing services firm Quess expects an increasing number of companies to scrutinise the cost of individual resources against the productivity delivered during the upcoming appraisal season.

    “Within each organisation’s performance management systems, we will see some kind of Bell Curve-based evaluation where both high performers and the lowest performers, in comparison, will be identified. Around 5% of the bottom performers will be put on performance improvement programs by organisations if they do not meet the productivity criteria,” said Vijay Sivaram, CEO, Quess IT Staffing.

    The Bell Curve is a system of performance appraisal and a method to evaluate performance of employees by force ranking them into a bell-shaped graph, varying from worst performers to best performers.

    Firms are also expected to “let go of high cost resources” if they are able to get a similarly skilled employee at a lower cost, according to industry sources.

    Most IT companies have policies that enforce termination if employees do not complete performance improvement programmes successfully.

    In fact, the scrutiny has become tighter at the junior level, too.

    Last month, Wipro terminated the services of over 450 trainees after they repeatedly failed in internal tests, the Bengaluru-based IT services provider told ET in response to an email query.

    “We had to let go of 452 freshers after they performed poorly in assessments repeatedly even after training,” it said. “In line with the standards we aim to set for ourselves, we expect every entry-level employee to have a certain level of proficiency in their designated area of work. The evaluation process includes assessments to align employees with the business objectives of the organization and requirements of our clients,” Wipro said.

    Other IT companies are expected to follow suit.
    The Economic Times

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