Image By: Cognizant Technology Solutions on Flickr

Cognizant's quarterly annualised voluntary attrition increased to a record 29 per cent in the second quarter, up from 18 per cent the previous quarter, as the business continues to struggle with the departure of thousands of junior and mid-level employees in India. In the last quarter, the corporation lost an average of 331 employees every day. Involuntary attrition (those who were requested to leave) accounted for 31% of the total.

As demand for engineering and programming talent – particularly those with digital capabilities – increases, attrition has increased across the board in the IT services industry. For the rest of the year, the talent war is projected to continue. Cognizant, on the other hand, has outperformed all of its competitors by a large margin.

“This macro demand backdrop has also created a demand-supply imbalance in key skills and has meaningfully increased industry attrition. As we noted in last quarter's remarks, we expected attrition to go up sequentially in Q2, and it did,” In a conference call with analysts, CEO Brian Humphries stated.

The attrition has been especially severe in India, where about two-thirds of the company's employees are situated, and Humphries has referred to India as one of the “hottest markets we have seen or our team has seen over the last 10-plus years.”

Cognizant's president of digital business and technology, Rajesh Nambiar, stated, “Everybody is hiring from each other. We are managing attrition with lateral hires, making sure the customers are not impacted. Our margins are higher than they used to be”. 

Under Humphries, Cognizant's attrition rate has been over 20% over the past two years. The company stated that it lost certain deals in the first quarter due to a lack of staff. On a trailing twelve-month basis, attrition has increased at TCS, Infosys, and Wipro, but is still lower than Cognizant's at 8.6%, 13.9 per cent, and 15.5 per cent, respectively.

Cognizant says it is taking steps to reduce attrition. “Annual merit-based increases have been announced here in the last few weeks. They're effective October 1. That's on top of a whole host of other ad hoc measures: out-of-cycle increases, promotion, retention dollars. We've announced a shift in the last few months to quarterly promotion cycles for billable resources,” Humpries stated.

To mitigate the damage, the corporation plans to hire 100,000 laterals and train another 100,000 employees this year. According to the firm “They expect to onboard approximately 30,000 new graduates in 2021 and make 45,000 offers to new graduates in India for 2022 onboarding”. 

The company's attrition, according to Kawaljeet Saluja, head of research at Kotak Institutional Equities, goes beyond the need for hot skills. “The company has little choice but to go full throttle on laterals to fulfil buoyant demand. High attrition backfill using laterals entails risks to margins (higher cost of laterals, lower utilisation) and execution,” he mentioned in a note.

Even though Cognizant boosted its revenue guidance and is employing close to 30,000 new graduates, Hansa Iyengar, principal analyst - IT strategy (enterprise IT), stated a 31 per cent attrition rate will affect the company's ability to provide high-quality, uninterrupted services to customers.

(Source: Times of India)