Tata Consultancy Services breaks The ESOP myth

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Excerpts:

Tata Consultancy Services (TCS), India’s largest IT services firm, has defied the trend. Not only has the country’s largest software exporter broken the ESOP myth by retaining its employee base by not using it, it has also set itself on a high growth trajectory. On the manpower front for instance, it plans to hire around 40,000 employees this financial year. At the end of Q1 FY11, the total employee strength of the company was 1,63,700. Foreign nationals formed 7.2% of the total employee base and 31% were women.

During the last financial year, TCS saw an attrition of 11.8%, while during the first quarter of the financial year 2011, it reported an attrition rate of 13.1%. During the same quarter, Infosys Technologies reported an attrition rate of 15.8%. Wipro too, that uses ESOPs as a lever to retain employees, reported 15.8% attrition rate in the first quarter and 23% as annualised attrition rate.

Attrition levels in the IT industry presently hover between 15-18%.

It is important to take a holistic view of the prevalent trends in the industry for a sound understanding of TCS’ ‘no show’ on the ESOP front. With the global economy reviving, tech firms have started witnessing a momentum in their volume growth. However, the sudden surge in demand from the clients over the last few months has taken a toll on the tech companies, who now struggle to retain their employee base.