An IT & ITES labour conundrum

by Mahesh Vyas

According to CMIE’s Consumer Pyramids Household Survey (CPHS), the Information Technology (IT) and Information Technology Enabled Services (ITES) together employed 1.78 million people in September 2021. The average for the quarter ended September 2021 was lower at 1.74 million. This is also lower than the average 1.9 million the industry employed in the quarter of June 2021. Employment in the IT & ITES industry had peaked at 2.23 million in June 2021.

The IT & ITES industry is a small employer. At about 2 million it accounts for a mere half per cent of the total employment in the country. But, it provides one of the most coveted jobs in the private sector. Demand for IT&ITES professionals from the larger companies is on the rise. Companies are reportedly hiring aggressively. But, at the same time, attrition rates have risen. This suggests that much of the hiring by companies is from within the industry. There seems to be a much lower preference for fresh graduates. This could be because of some scepticism regarding the quality of fresh candidates graduating after remote education in the shadow of Covid-19 and stringent lockdowns.

Most of the employment in this industry is provided by some of the best companies in India. Tata Consultancy Services employs over half a million. It alone accounts for over a quarter of the total estimated employment in this coveted industry. Infosys is a distant second but it is still a very large provider of good quality jobs to nearly 280,000 people. Next, HCL Technologies and Wipro come close with both employing a little short of 200,000. Wipro is a somewhat diversified enterprise and so some of its employment is in non-IT businesses. Wipro also does not provide details of employment like other listed IT companies do. We have estimated employment by the company using its wage bill as a reference point.

All the top IT-jobs providers in India are listed companies. There are some large unlisted IT companies as well, such as Accenture Solutions, Microsoft Corporation, SAP India, etc. While some of them hire in the thousands, none match the hundreds of thousands hired by the top four IT companies in India mentioned above.

Two databases maintained by CMIE show somewhat comparable employment estimates for IT & ITES companies in India. CPHS estimates that the industry employs about 2 million people. This estimate is drawn from a large household survey. Independent estimates drawn from CMIE’s Prowess database indicate that listed IT & ITES companies employ about 1.5 million. This implies that the unlisted companies could be employing about half a million or a little more than that. This is what TCS alone employs.

Indian companies are not very good in providing information on the number of persons they employ. Even listed companies do not provide employment data at a quarterly frequency as they provide quarterly financial statements. We have used the salaries and wages data which is available at a quarterly frequency for all listed companies and the employment data of a select few that provide such data to estimate employment among listed companies in the industry.

There are 300 listed IT & ITES companies in India. Of these, employment data was available for only 10 companies for the June 2021 quarter. Of these, six are of the top 10 companies and four from the rest. We use this and similar data for earlier quarters along with the total wage bill of individual companies to derive an average wage rate for the top ten IT & ITES companies and separately for the remaining IT & ITES companies. Using the average wage rates from the select few who provide employment data and the published total wage bill for individual companies we estimate the employment by each company.

The top 10 listed IT & ITES companies are estimated to have employed 1.46 million people in the quarter ended June 2021. The remaining 130 companies employed only an estimated 0.13 million.

A concrete estimate of the size of the IT&ITES industry is the wage bill as provided by the companies. The total wage bill of all 140 listed companies for which financial statements were available for the quarter ended June 2021 was Rs.536 billion. Of this, the top ten companies accounted for Rs.495 billion and the remaining 130 companies accounted for a meagre Rs.41 billion. The top ten companies account for about 91 per cent of all employment among listed IT&ITES companies and they make 92.4 per cent of all wage payments to them. Wage rates are higher in the top ten companies.

The total wage bill of IT&ITES companies shot up by 15 per cent y-o-y in the quarter ended June 2021. In the preceding four quarters, growth was between 4.7 and 6.3 per cent. The 15 per cent growth of the June 2021 quarter was the best since the December 2018 quarter. Ten companies that have provided data for the quarter ended September 2021 indicate a further acceleration in the wage bill to 17.4 per cent. These are mostly the top companies.

Evidently, the demand for labour from IT&ITES companies shot up in the quarter ended September 2021 but, the lack of growth in total employment seen in CPHS in the September 2021 quarter indicates that the larger companies are mostly poaching available human resources. The demand for fresh labour is limited. Smaller companies that are losing human resources are not replenishing them commensurately.

CMIE STATISTICS
Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.0 +0.3
Consumer Sentiments Index
Base September-December 2015
60.3 0.0
Consumer Expectations Index
Base September-December 2015
62.1 +0.5
Current Economic Conditions Index
Base September-December 2015
57.5 -0.8
Quarterly CapEx Aggregates
(Rs.trillion) Dec 20 Mar 21 Jun 21 Sep 21
New projects 1.50 2.22 2.63 2.05
Completed projects 0.87 1.17 0.72 1.06
Stalled projects 0.30 0.26 0.32 0.03
Revived projects 0.15 0.22 0.12 0.25
Implementation stalled projects 0.20 0.32 0.25 0.22
Updated on: 27 Nov 2021 9:28AM
Quarterly Financials of Listed Companies
(% change) Dec 20 Mar 21 Jun 21 Sep 21
All listed Companies
 Income 1.6 15.1 39.3 27.8
 Expenses 0.1 7.4 38.9 27.2
 Net profit 58.1 330.6 134.8 52.9
 PAT margin (%) 8.4 8.8 9.0 9.7
 Count of Cos. 4,456 4,376 4,460 4,463
Non-financial Companies
 Income 0.2 17.8 56.4 35.8
 Expenses -0.7 10.6 57.4 36.3
 Net profit 52.1 223.4 200.8 59.5
 PAT margin (%) 8.8 9.0 8.5 8.9
 Net fixed assets 2.3 13.9
 Current assets 4.3 17.3
 Current liabilities 0.8 7.1
 Borrowings -4.3 21.1
 Reserves & surplus 11.7 18.6
 Count of Cos. 3,281 3,239 3,290 3,265
Numbers are net of P&E
Updated on: 27 Nov 2021 9:28AM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.3 0.3 -2.2
 Expenses 13.6 0.3 -4.5
 Net profit 15.1 -11.1 46.8
 PAT margin (%) 2.1 2.1 6.8
 Assets 9.8 8.6 12.5
 Net worth 8.5 4.6 13.5
 RONW (%) 3.7 3.5 8.8
 Count of Cos. 32,262 31,180 7,893
Non-financial Companies
 Income 14.0 -1.5 -4.5
 Expenses 14.2 -1.2 -6.3
 Net profit 21.6 -20.7 36.0
 PAT margin (%) 2.9 2.4 6.4
 Net fixed assets 5.6 10.4 1.9
 Net worth 7.9 2.3 11.3
 RONW (%) 6.4 5.0 9.9
 Debt / Equity (times) 1.0 1.1 0.7
 Interest cover (times) 2.3 1.9 3.5
 Net working capital cycle (days) 74 81 66
 Count of Cos. 25,777 24,849 5,777
Numbers are net of P&E
Updated on: 19 Nov 2021 9:14PM