3 Lakh+ Infosys Employees Will Get Salary Hikes Even As Attrition Touches Record High; More Employees Will Be Hired

Infosys is in the news this time for giving competitive compensation revisions to its employees. Also, the IT major plans to increase the hiring target for the next year.

The hiring and the increased compensation might eat into the margins of the company, but it is being seen as a strategic investment towards tackling the attrition which rose by 70 basis points sequentially in the quarter ending June 30, 2022 (Q1FY23).

Hiring & Attrition

Speaking of recruitment, Infosys already has hired more people than TCS, Wipro, and HCL Tech. In the latest quarter, the operating margins are impacted by the lower utilization due to the aggressive hiring by the company.

With a net addition of 21,171, the total Infosys employees count has reached 3,35,186 from 3,14,015. From total employees of 2,67,953 as of June 30, 2021 the net addition has increased by 67,233 counts.

Compared to the hiring of 21,948 employees in the preceding quarter, the net hiring in Q1 is slightly lower.

Expanding by 70 basis points from 27.7% in Q4FY22, the company’s IT services attrition rate has increased to 28.4%. The same number in Q1FY22 is 13.9%.

CFO of Infosys, Nilanjan Roy said that “We are fueling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth. We continue to optimize various cost levers to drive efficiency in operations”.

He added that continued high focus on cash led to strong FCF to net profit conversion at 95.2% and improvement in ROE to 31.0%.

Margin Degrowth

Speaking of this, the margin of company impacted by 160 basis points due wage hike.

In Q4FY22, the operating margin was 23.7% and Q1FY23, the operating margin dropped down to 20.1%. Up by 4.7% from ?6,603 crore in Q1FY22, the operating profit stood at ?6,914 crore. 

Head of research at Reliance Securities, Mitul Shah said that “EBIT de-grew by 1% QoQ (up 5% YoY) to Rs69.1bn while EBIT margin stood at 20.1% (down 149bps QoQ /down 361bps YoY), 63bps below our estimate of 20.7%, due to higher employee cost and sub-contracting expenses. Aggressive hiring resulted into lower utilisation for the quarter impacting overall operating margins.”

Aditi Patil – a research associate at Prabhudas Lilladher said that “BIT margin came at 20%, a decline of 160 bps QoQ (Ple: 20.7%, Cons: 21%). LTM IT services attrition increased to 28.4%, 70 bps QoQ. Strong net-headcount addition of 21,171, 6.7% QoQ. EBIT margin guidance band is retained at 21-23% for FY23. Management expects margins to be near the lower end of guidance.”

Infosys hired 19,082, 5,725, 7,035 employees more than HCL Tech, Wipro, TCS respectively.

In the first quarter of FY22, TCS net hiring was 14,136 employees, Wipro’s net addition was 15,446 employees, and HCL Tech’s lowest at 2,089 employees.