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Cognizant reports the highest attrition of 33% in the IT services industry

By Ruchi Upadhyay 
Updated Date
Cognizant reports the highest attrition of 33% in the IT services industry

Chennai: Cognizant reported the highest attrition of 33% among IT services majors, prompting CEO Brian Humphries to allocate higher bonuses to retain employees amid the war for talent across the tech industry.

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In comparison, attrition stood close to 20% for Infosys, Wipro and Tech Mahindra while TCS and HCL reported 11.9% and 15.7%, respectively, in the quarter to September.

Humphries told analysts that Cognizant is creating 2020 bonuses at higher levels than 2019 and will also implement targeted merit increases and promotions in the fourth quarter.

He said that while this move will hurt the cost structure in 2020 versus the prior year, it is an essential and normalised part of the cost structure in the services business. This comes in the larger backdrop of the company reporting voluntary annualised attrition at 33% This number has come down from 37% which was the number in the previous quarter.

“We’re investing meaningfully in the business, probably even more than I anticipated a year ago because the more I’m here, the more I see opportunities. In talent overall, in the talent management system, we’re accruing bonuses at higher levels. We’re getting back to merit-based promotions and raises,” Humphries said.

Cognizant reported double-digit revenue growth of nearly 12% year-over-year and delivered $4.7 billion in the third quarter with all segments growing to plan and executing against its transformation strategy, he said. Cognizant said fiscal year 2021 guidance is for 11% revenue growth to $18.5 billion, which would be its highest annual revenue to date.

The company’s global headcount stands at 318,400 in the third quarter, which it says is among the highest levels ever. Further, the hiring engine brought on over 17,000 net new hires in the quarter and the company has grown its headcount by over 35,000 people since this time last year.

Humphries called digital talent “constrained” and therefore an “expensive asset” which was why Cognizant was looking to attract digital talent. The company’s digital revenue represents 44% of total revenue and has grown 18% in the third quarter.

“In the last six months, we have overhauled our talent management and annual performance evaluation processes, which allow us to develop a diverse, inclusive, and high-performance team,” he said. “We have invested in growth by strengthening our country leadership with senior hires in Germany, the Nordics, Australia, and Asia-Pacific Japan. Earlier this week, we also announced the completion of our executive committee with the announcement of our new president for global growth markets and the newly created role of executive vice president and chairman for Cognizant India.”

However, he expressed concern over the growing Covid-19 numbers. He said that could lead to a situation that is challenging going into the months ahead.

“This week’s growing Covid-19 numbers and the latest restrictions, including lockdowns that were announced across Europe today, are a major cause for concern for us,” he said. “It’s unclear whether this will really impact the decision-making and indeed budgets. So what has looked more promising, at least in months, may turn against us.”

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