IT sector dials down on contract staffing

Contract hiring by the information technology (IT) services sector has dropped nearly 20% with tech companies, weighed down by rising margin pressure, focussing on retaining their permanent employees. Recruitment companies are also scrambling to get more clients on board amid falling demand from the IT sector.

Adecco estimates that there are about 10-12% of contract workers in the IT and IT-enabled services (ITeS) space with less than eight years of work experience in the technology space.

The drop in contract staffing comes on the back of a ballooning crisis in the IT sector where firms had gone on a hiring frenzy after two years of a covid-induced lull.

From the second half of 2021 to a quarter back, firms were offering 60-70% hikes and counter offers as businesses across sectors needed tech teams to digitize their systems and run cloud computing operations.

However, saddled with a large bench strength—employees who were hired but not deployed—and a slowdown in US-based clients, tech firms are slashing their hiring targets for the next fiscal year.

Onboarding of campus recruits has been delayed by many tech firms by six months, and the spillover to the next year means a reduced need for contract workers.

Recruitment firms heavily dependent on contract staffing will take a hit on their revenues if the trend continues.

The recruitment firm has seen a 10-20% drop in hiring mandates in July-September compared to corresponding period of last year.