BLESSING IN DISGUISE: ATTRITION RATES MAY SLOW DOWN TOO

Pradipta Mukherjee, Kolkata, August 3, 2008
Business Standard

It’s a blessing in disguise, of sorts. Indian companies, which had to face a huge attrition problem over the last few years, can finally breathe easy. HR analysts said the economic slowdown is expected to reduce the attrition rates across industries, at least for the next two quarters.

The attrition rates had touched almost 35 per cent in some industries such as financial services and retail, primarily due to companies ramping up their manpower. But the party seems to be over for the time being.

The country's second largest bank, ICICI Bank, for example, froze promotions, reduced bonuses and cut annual increments in April this year — a sure indicator of companies trying to bring in cost efficiencies to prepare for the slowdown ahead. The bank says its attrition rate has not gone up.

Sampath Shetty, vice-president, TeamLease Services, a staffing firm, says the overall employment outlook has seen a decline over the last four quarters, with cities such as Mumbai and Kolkata reaching a growth threshold for job opportunities. Chennai would experience a hiring slowdown, with most of the manufacturing firms at the last stages of large-scale hiring for Greenfield projects.

Others agree. Milind Sarwate, chief of HR and strategies at Marico, says managing attrition had become very challenging for the FMCG industry, even after good salary hikes and career opportunities.

"But as the economy cools down, the attrition rates in the FMCG sector will come down from the current 20 per cent to around 12 per cent very soon. The companies will hire less, leaving limited options for employees to switch jobs."

Y P Yadav, managing director of Genius Consultants, a recruitment and corporate training firm, estimates the attrition rates in the retail and real estate sector to come down to 25 per cent beginning next quarter — a fairly high number, but is better than the earlier rate of 30-35 per cent. This is because retail chains will hire less and depend more on temporary staff and variable payments.

Spencer's Retail, for instance, will do away with about 40 of its not-so-profitable stores and hire less people. The existing employees will be relocated to the new stores locations. Spencer's used to hire 500-600 people per month till last year. But over the next two quarters, the company would recruit about 200-300 people per month, according to a spokesperson of the company.

“The July-September quarter will determine the course of industry over the next two years. A lot will depend on the performance of the economy. New recruitment will depend on how businesses shape up during the coming quarter,” said Amitabh Mundhra, director, Simplex Infrastructures.

According to data provided by Yadav, the information technology sector, including BPO services, software and hardware companies, currently witnesses average attrition between 35 and 40 per cent, which will again slow down as corporates curb hiring.

For instance, Patni Computers reduced its workforce by 400. Companies like IBM and TCS have slashed jobs in their software and BPO operations. IT company Hexaware has also announced that it will not hire for the next two quarters.

Simultaneously, telecom and banking services currently have an attrition rate of 25 – 30 per cent, while media, entertainment and manufacturing witness an attrition of 15 – 20 per cent currently, Yadav informed.

According to Devang Sampat, VP – marketing and programming of Cinemax multiplex chain, “The overall slowdown would cause less expansion which will directly affect recruitment plans. For instance, till last year we were expanding by 100 screens per year. But now due to the overall slowdown we are looking at 20-25 screens per year. Each Cinemax property would employ close to 100 people, and that will obviously come down drastically as we expand at one-fourth the rate compared to what we used to.”

Aviation, which has also been a big employment-generator, is yet another example. Go Air, for example, axed 400 jobs in the past six months and has frozen recruitment plans. Deccan, too, has frozen recruitment and is reviewing its business plans due to the sudden increase in jet fuel prices.