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Attrition high, so Infosys invokes job clause to retain talent

The non-compete clause under contention says that after resigning, an Infosys employee cannot work, for a period of six months, with one of the named rival companies on a client he or she would have serviced in the preceding 12 months before quitting.

Written by Pranav Mukul | New Delhi |
Updated: April 23, 2022 9:58:28 am
Infosys TCS, TCS, Tata Consultancy Services Ltd, Infosys, BPO sector, IT/BPO sector, Business news, Indian express business news, Indian express, Indian express news, Current AffairsInfosys, on its part, has said that such a non-compete clause is a “standard business practice” in employment contracts. Reuters

An overheated job market in the software and BPO space has triggered a surge in attrition rates at TCS and Infosys, the top two IT companies in the country by revenue, prompting tech companies to fall back on unconventional tactics in an attempt to retain talent.

A workers union representing IT and BPO sector employees has said that Bengaluru-based Infosys is enforcing a clause in the employee contract to prevent workers from joining some of its competitors. The union has written to the Ministry of Labour & Employment and the Ministry of Corporate Affairs, seeking intervention in the matter.

Infosys, on its part, has said that such a non-compete clause is a “standard business practice” in employment contracts.

The non-compete clause under contention says that after resigning, an Infosys employee cannot work, for a period of six months, with one of the named rival companies on a client he or she would have serviced in the preceding 12 months before quitting.

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Among the rival companies named in the employment contract are TCS, Accenture, IBM, Cognizant and Wipro for Infosys’ software services wing. For the business processing management (BPM) wing, the named competitors in the employment pact are Tech Mahindra, Genpact, WNS, TCS, Accenture, IBM, Cognizant, Wipro and HCL.

This comes amid rising attrition in the segment. For the March-quarter, Tata Consultancy Services reported an annualised attrition rate of 17.4 per cent, up from 7.2 per cent in the same quarter last year. Infosys reported an annualised voluntary attrition rate of 27.7 per cent during January-March period, compared to 10.9 per cent in January-March 2021. Other top IT companies are yet to declare their fourth quarter and full-year 2021-22 results.

“This clause has been there for quite some time. There are a lot of job opportunities in the market because of which the attrition rate is very high. Companies were even matching offers received by their employees from rivals to retain talent. But in the last few weeks, I have received around 65-70 complaints, where Infosys is enforcing this (non-compete) clause,” Harpreet Singh Saluja, president of Pune-based IT employees union NITES told The Indian Express.

“It is standard business practice in many parts of the world for employment contracts to include controls of reasonable scope and duration to protect confidentiality of information, customer connection and other legitimate business interests. These are fully disclosed to all job aspirants before they decide to join Infosys, and do not have the effect of preventing employees from joining other organisations for career growth and aspirations,” Infosys said in response to a set of queries sent by this newspaper.

In the company’s earnings call for the January-March quarter, Infosys Chief Financial Officer Nilanjan Roy said: “Voluntary LTM (last 12 months) attrition increased to 27.7 per cent. While LTM attrition continues to increase due to the tail effect, quarterly annualized attrition saw a decline of approximately 5 per cent after flattening in the previous quarter… In the backdrop of various supply side pressures, we rolled out various measures to reduce attrition – higher compensation increases, higher promotions, skill-based interventions, etc in addition to higher subcons (subcontractors)”. He added that attrition “should come down in the following year”.

TCS, India’s largest IT services company, also said that over the next two quarters, its attrition rate is expected to flat line and then taper.

As of March 31, Infosys had 3.14 lakh total employees, while TCS had 5.92 lakh people on its rolls.

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