Hiring and pay up at Indian outsourcers, even as US unemployment stagnates near 26-year high

India outsourcers hiring staff as US demand grows

MUMBAI, India — India’s top three outsourcing companies are ramping up hiring and increasing pay as global corporations, mainly from the U.S., send more work offshore to cut costs as they emerge from the downturn.

Tata Consultancy Services, Infosys, and Wipro expanded their global workforces by an average of 5.1 percent last quarter, together adding 16,701 employees, company documents show — an early sign that the Great Recession may ultimately benefit India as cost-conscious companies outsource more work, just as they did after the dot-com bust.

“Our expectations are for flat to marginally stronger IT budgets with a greater share of offshore spend,” Wipro chairman Azim Premji said in a conference call Wednesday. “Our customers remain focused on cost reduction.”

The employment revival in India’s outsourcing sector, which counts on the U.S. for about 60 percent of global sales, comes as unemployment in the U.S. stagnates around 10 percent — near a 26-year high. Inflation-adjusted wages in the U.S. last year fell 1.6 percent, the biggest decline since 1990.

“When there is a downturn the compulsion to control costs increases,” said Dipen Shah, an analyst at Mumbai’s Kotak Securities. “The demand for offshoring will increase. That will play to the advantage of Indian IT companies.”

He argues that the cost savings from offshoring has helped U.S. companies survive — and that’s good for the American worker.

“You might say jobs in the U.S. are getting displaced by jobs in India, but because of the value provided by Indian companies and lower costs, there are firms who are able to keep their heads above water and continue to employ their existing employees,” he said.

TCS, Infosys and Wipro, whose clients include leading companies like Goldman Sachs and General Electric as well as U.S. government agencies, can do everything from call center management and claims processing to software development and consulting. All three reported stronger than expected results for the December quarter, with revenue and volume growth, signaling that the cost-cutting imperative of this last, lean year may be over for India’s $60 billion software services industry.

After about a year of hiring slowdowns, all three companies are sweetening compensation as the fight to hold on to talented employees in India heats up.

Infosys offered its Indian employees an average 8 percent pay hike in October, their first raise since April 2008, and executives said last week they are considering another raise to combat rising attrition.

“The market is heating up and we want to retain talent,” human resources director Mohandas Pai told reporters.

Infosys last week raised its gross hiring target for the second time this fiscal year, to 24,000 people.

Wipro executives said they plan to offer staffers a raise in February.

Tata Consultancy Services has paid out 150 percent of performance-linked pay — which normally amounts to 20 to 45 percent of compensation — for the last two quarters, and executives say they will raise salaries next quarter, after a year-long wage freeze.

As demand for workers revives, employers have begun to worry about rising staff turnover. Employees who sat tight during the downturn have started to shop around for better jobs and better salaries.

Attrition at Wipro jumped to 13.4 percent last quarter, up from an average of 8.9 percent over the prior three quarters. Attrition at Infosys rose to 11.6 percent last quarter from 10.9 percent the prior quarter. Attrition at TCS has been stable, at around 11.5 percent, though executives say they expect that number to rise.

Indian firms say they are increasing global hiring, including in the U.S., as they pursue higher-end work like consulting. But U.S. employees remain a fraction of total staff.

TCS, for example, recently finished hiring 250 Americans for its Cincinnati campus, but U.S. employees still account for less than 0.5 percent of the company’s global workforce.