How to Curb Attrition in IT Companies?

In the last two years, the IT companies have witnessed high attrition rate than ever before. Service-based companies are facing sever attrition than the product-based companies. Although it is normal that people move ahead in their career journey, if the job mobility is too high it changes into attrition. With this, cost of new hires has increased steeply, which is causing overload to the companies.

Why Attrition Happens?

There are multiple reasons why people leave companies. Some of the common factors include career stagnation, poor financial growth, fear of falling behind in new technologies, locations, policies of the companies, nature of job function, micromanagement, managers’ treatment, longer work hours, and so on.

More than these factors, attrition happens because of the nature how service-based companies operate. They generally pile up a pool of resources (employees) to showcase to the prospective clients to crack the deal. Such companies hire the employees on certain pay package and then rent them out to their clients at a different cost. The margin is the benefit of these companies. For example, if a company hires an employee at Rs 20,000 per month salary, it rents the same resource to its client at a cost of Rs 50,000 per month. In this case, Rs 30,000 per month is the income. After deducing other expenses, the net benefit may stand anything between Rs 10,000 — Rs 20,000 per month to the company.

Typically, in such companies, billing of every single resource is the primary target. However, there may be cases, when an employee is on bench, without any project assigned to. The companies regard such employees a burden to their financial health. If an employee cannot be assigned to a project for a longer time, such employees can be laid off. To avert the fear of layoffs, the employees, who fall on the bench, start looking outside for a new opportunity.

Here lies a trap. Those who go out get a better pay package and even career promotion. This becomes a lure for others, who in turn start looking outside for better opportunities. This job mobility causes attrition.

How Can Companies Curb Attrition?

There are many steps that the IT companies can implement to curb attrition.

Ensure Transparent Work Culture: Most of the companies are run by managers. Managers are the mini-companies within a company. If the managers are not encouraging in nature, they become a road blocker to the career growth of the people in the team.

Managers should be responsible for the task completion and man management. If it is related to career growth, the companies must follow ‘career triangle’ formula. According to this formula, the reporting manager, career guide, and one person from HR should engage the employees.

Antipathetic attitude to employees is the first reason to attrition.

Be Empathetic: An employee can come on bench because of various reasons such as the project is over, client ends the project terms with the serving company, there is an organizational restructuring either of the client or the serving company and certain roles or resources are not required, or the employees fail to perform.

The companies should have empathetic attitude to such resources than being anti-pathetic. The people on bench can become powerhouse for the company. Such people should be aligned with upskilling programs, in-house trainings, and should be considered as resource pool so that the need of hiring new people is met from this pool itself.

Longer notice period promotes a way for window shopping for job offers with higher pay.

Have Shorter Notice Period: Several IT companies have longer notice period to discourage the prospective companies from hiring their employees. This policy has failed to curb attrition, rather it opened a new opportunity for the employees to window shop multiple job offers with higher salary packages. I have come across several cases where the employees earning Rs 8,00,000 per annum have got the offer of Rs 20,00,000 per annum or even higher in some cases, a jump of 150%. This is because with long notice period, the employees have a time when they can hunt further for the better offers.

Hence, the companies should have shorter notice period to prevent window shopping for jobs. I would rather recommend to have two polices for notice period, a 15-day notice period for the employees on bench, and a 30-day notice period for those who are working on a project.

Stop playing tricks. If the employers play tricks, the employees will play tricks; or if the employees play tricks, the employers will play tricks.

Upskill People: Have a program of upskilling people or training them new skills. Some companies have their academies to support this. However, the approach should not be to focus on to recommend people to learn a course or program, it should be aimed for career growth.

The logic behind upskill should be aligned with opportunities.

The program should have a clear line beginning with training, to hands-on experience to assigning to a project with a client. For example, a software developer should be recommended to learn website or app development program. A person with multiple skill sets can become an asset for the companies than a burden. Employees on bench should be preferred for upskilling more.

Run In-house Trainings: Companies should have in-house trainings on soft skills such as etiquette for email communication, basic grammar skill for all, awareness to data protection, and so on. People on bench should be given responsibilities to take up these trainings and then provide theses trainings to others.

Engage in Continuous Discussion: Managers and seniors should discuss the career plan with the team members. For example, if a software engineer wants to become a manager in future should be aligned with the growth journey. Growth journey should also have a plan like what qualifications, skills, and experience are required for a role and how a resource can be upskilled to rise onto the growth path. This will eliminate the need to leave the organization for a career growth.

‘Quiet quitting’ means people don’t see their aspiration materializing.

Curb ‘Quiet quitting’: The term ‘quiet quitting’ has become the buzzword nowadays but this is not a new phenomenon. I don’t say this a phenomenon but a silent habit that is inherent in the working people if their aspiration is not met within an organization. If the companies have a conservative viewpoint that the resources once hired for the roles should be there for life, the people will feel stuck. Such people will do whatever minimum is expected from them if they do not switch to a new organization. They will shun off from creating a plan for the team members and work on their growth.

Map Salary & Promote People: Every company must map the salary with the years of experience. The ideal mapping goes as salary should be in the ratio of 1.25–1.50 to each year of experience a resource has. For example, if a resource has 10 years of experience, the salary would stand at 10 x 1.25 = 12.50 lakh per annum. For a multi-role job, or an advanced technology, the salary can be higher. Although most of the organizations know about this, some take advantage and tend to pay low until the situation goes out of control.

Better pay pack and promotion will motivate people to stay.

Promotion should also be clearly visible. For example, if a resource joins an organization as a ‘junior software engineer’ and has worked for two years, such a resource should be promoted to ‘software engineer’ even if he/she does not asks for. After two years, the same resource can be promoted to ‘senior software engineer’ position.

If people are paid fairly and promoted in due time without much struggle or pursuance, they will stay for long. Secondly, fair salary mapping would make it difficult for other organizations to offer higher pay package for every role.

Skip paying variable pay only to pay out joining bonus.

Pay Variable Money: A good number of organizations have variable pay (VP) to the CTC, which is performance linked. Most of them have a policy that this amount is not paid if a resource leaves them mid-year. This is not a fair practice. VP should be paid on pro rata basis.

Not paying VP has given a way to the employees to negotiate on joining bonus where they are going. The outgoing employees get the amount that they might have been losing otherwise. Remember every organization will have to pay the joining bonus if they skip paying the variable compensation.

However, the organization may plan this variable compensation in the following way.

If the variable pay (VP) is based on pro rate basis and the notice period is shorter, there would be little financial loss to the outgoing employees. This will create a situation that they would not be in a position to demand joining bonus.

Reward Retention Bonus: Companies should role out retention bonus. However, this should not be like only those candidates are paid retention bonus who resign. It should be a permanent policy to lure people to stay. This can be like on completion of certain milestone, say every five years, retention bonus should be paid. Also, the amount should not be meagre. It should be like at least half of the gratuity money.

Retention bonus will help people meet their financial needs.

Take an example, if a resource completes four years in an organization, such a person would try to stay for one more year to get the retention bonus as people stay to get gratuity. While gratuity is paid on final resignation, the retention bonus should be paid out every five years.

First published on LinkedIn.