Indian job market saw 20.3% attrition in H1-2022

You have been reading reports about rising attrition in the IT sector. A recent survey by AON PLC shows that this is not just limited to the IT industry but is across a number of industry segments. According to the AON PLC report, in the first half of the calendar year 2022 (H1-2022), India witnessed overall attrition rate of 20.3% on an average. This is sharply higher than the previous periodic averages. If you have been hearing about the Great Resignation and how lesser number of people are opting for jobs, here is the perfect example of how the Indian employee market is changing at a rapid pace. This is creating a problem for business. 

The attrition rate also means that the demand for workers is more than supply and that makes good resources a scarce product. Not surprisingly, salary levels are expected to rise by 10.4% in FY23, on top of a steep 10.6% increase in the year FY22. The high level of attrition in FY23 is likely to put further pressure on companies for retaining employees. One of the outcomes we see today is that moonlighting has become a major issue for IT companies and some are even forced to tolerate moonlighting just in order to retain workers. Attrition and employee cost hikes will be the big challenge in FY23 and FY24.

Attrition is defined in technical parlance as the pace at which people leave a company; either voluntarily or involuntarily. Now this has been triggered by various reasons. Firstly, the demand for digital skills is much more than demand and that segment is seeing the maximum amount of attrition. Secondly, post the COVID crisis, employees have become more conscious about work life balance and are willing to take pay cuts for the same. Also, work-for-home has turned out convenient for a lot of employees and many have actually turned down jobs when asked to report back to duty at the offices.

What is driving attrition in India in such a big way. AON PLC has identified some key triggers for the high level of attrition in India. Interestingly, people leaving the job due to better pay or internal disparity has reduced. What has increased is people leaving their jobs because their current job profile makes them stagnate and does not provide them the required growth opportunity. There has been a sharp rise in people quitting jobs due to hostile managers, unfavourable work environment etc. Interestingly, a largely number of employees have left their jobs for higher education or acquiring new skill sets.

Interestingly, there is also a lot of attrition among companies on account of concerns over job security. That sounds ironical but it is true. In fact, with the global recession concerns, this fear is likely to get more pronounced and we could find higher levels of attrition in India. Already, people are finding that it is possible to make a living consulting for multiple companies, especially for individuals with specialized skill sets. This gives them the confidence to tender their resignation and branch out on their own, albeit small. There are now a lot of people, especially among the young, looking for better work-life balance.

Are there any sectoral trends in the attrition. You would have guessed that technology takes a chunk of the big attrition stories in India. In the technology and digital space, ecommerce has attrition of 28.7%, High Tech at 21.5% and ITES 21.4%. In addition professional services at 25.7% and financial services at 24.8% also saw high attrition. However, attrition has been much lower at 14% in engineering, 12.9% in chemicals, 12.4% in automobiles and 8.6% in metals and mining. Clearly, the attrition is a lot more pronounced and popular in the new age economy sectors compared to the traditional old economy sectors.

Certainly employees and professionals are not complaining. Salary hikes are directly linked to the levels of attrition. After all, attrition has a cost and most businesses try to minimize attrition levels. The biggest expected pay hikes are also concentrated in the sectors with the highest attrition. For instance, Ecommerce expects a salary hike of 12.8% on an average followed by 12.7% in IT and ITES while for financial services the pay hike is lower at 10.7%. Surely enough, the employees of digital new age companies are laughing all the way to the bank. Attrition appears to be working for them perfectly.