Several companies are looking at rationalising their workforce expenses over the next few months through different means including putting more people in the lowest bands during performance appraisals, reducing bench period thresholds, and putting a freeze on variable pay for resources with low utilisation to encourage voluntary attrition of people on the bench, among various other methods, they said.
“The message going across many IT services companies this year is to increase the number of people falling into the lower rating bands in the bell curve,” said a top official at a consulting firm, who did not wish to be identified. “These people will either not be given increments, asked to go on performance improvement plans, or be eased out from the organisation.”
Nitin Bhatt, partner & technology sector leader at professional services major EY, said, “Some companies are rationalising their organisation and operating structures. This includes terminating non-billable staff and moving resources from high-cost locations to lower-cost geographies, often through the creation of shared services centres.”
He further said, “Some are reducing the workforce by doubling down on automation initiatives to enhance operational efficiencies, say, within the managed services business.”
Besides, many companies have made utilisation a critical KPI for variable payouts, which would lead to voluntary attrition of low performers, Bhatt said.
Industry insiders said some companies have reduced the bench time thresholds, for instance, from 90 to 60 days, to facilitate quicker company-initiated separations.
Employees spending a longer time on bench are seeing lower quarterly variable payouts and likely to see lower increases since their performance is directly a function of utilisation, said Jang Bahadur Singh, director, human capital solutions, at management consulting firm Aon. “At an organisation level, we expect much lower variable payouts and salary increases this year without organisations having to resort to layoff or salary cuts,” he added.
A technology services company has decided not to give increments to those who have been in the organisation for less than 24 months (as of March 31, 2023) while another IT company is not giving increments to associates who joined after December 2021, a top industry official said on condition of anonymity.
“The objective is to induce voluntary separation for those who were hired at huge premiums during the pandemic,” the person said.
A top official from a consulting company said, “There’ll also be a larger portion of people than usual put in the average performer band who will get smaller increments. A very select group, mostly those with skill sets that are hard to come by, will get the top ratings.”
Besides, most organisations have tightened hiring approval ladders, including for non-billable roles. This is being used for mission-critical investments and to fund new hires required for immediate billable opportunities, top officials said.
“The days of hiring in herds from the campus to maintain a bench are now replaced with very conscious and deliberate skill-based hiring, training and creating benches in the high demand skills areas,” said Shalini Pillay, India leader – global capability centres at KPMG in India. “Companies are also sharpening their focus on performance management and the appraisal process,” she said.
Singh of Aon said organisations are deferring campus onboarding dates well into the next year and there is much reduced hiring in campuses this year.
A select few companies are trying to avoid layoffs altogether. “They have made the decision to sacrifice margins for the sake of people retention during these challenging times,” a top industry official said.