Cognizant and HCL Reduce Bench Time for Employees Amid IT Sector Slowdown

India’s IT sector is adjusting to a challenging period as companies rethink their bench policies. The term “bench” refers to employees who are not currently assigned to any projects. This includes new hires waiting for their first assignment. Due to a slowdown in client spending, many IT firms are cutting down on how long employees can stay on the bench before they are let go.

HCL Technologies is one of the companies that have reduced the bench time. Employees at HCL can now stay on the bench for a shorter period without securing a project. Cognizant Technology Solutions is also tightening its policies. They are helping benched employees find projects but will require those who do not find a role to leave the company. This change aims to increase the utilisation rate, which measures how many employees are actively working on projects.

Sandeep Kalra, CEO of Persistent Systems Ltd, has emphasized the need to optimize resources. During a recent earnings call, he suggested that if employees cannot be given a clear career path, it might be better for them to look for opportunities elsewhere. This approach is part of a broader trend in the industry, where reducing bench size is seen as a response to the current slowdown in the tech sector.

The slowdown follows a period of rapid hiring during the pandemic, known as the ‘Great Resignation,’ when IT companies expanded quickly to meet high demand. Now, with lower demand from major clients, the Indian software services industry has seen its slowest growth rate of 3.8% for the year ending March 2024. Clients are spending cautiously, further dampening growth prospects.

Top IT executives have shared similar concerns. K. Krithivasan, CEO of Tata Consultancy Services (TCS), mentioned that clients are frequently scaling down or re-evaluating their programs. Wipro’s president, Srinivas Pallia, also noted that while demand has not shifted dramatically, clients remain cautious and discretionary spending is low.

The cautious spending is affecting the profitability of IT services companies. Except for TCS, the top five IT firms reported lower profits compared to the pandemic era. This has led to efforts across the industry to reduce bench sizes and lower costs. Phil Fersht, CEO of HFS Research, explained that this also encourages benched employees to find projects more quickly.

Traditionally, IT companies allowed employees to stay on the bench for up to 120 days. However, this period has been cut to around two months in some firms. Employees who do not secure a project within this time are often asked to leave. At HCLTech, those with strong performance ratings may receive extra time to find a project, while others may be asked to leave sooner.

The reduction in bench time and increased focus on utilization have improved the utilization rates at companies like Infosys, Wipro, and LTIMindtree, which now range from 83% to 85%. However, Tech Mahindra has reported a slight decrease in its utilization rate.

These changes are likely to have further impacts on employment in the IT sector, which has already seen significant job cuts. The combined workforce of TCS, Infosys, and Wipro decreased by 63,759 employees in the fiscal year ending March 2024.

While cost-cutting is a primary driver of these changes, there is also an emphasis on keeping employees engaged, upskilled, and aligned with company goals. Krishna Vij, vice-president of IT staffing at TeamLease, explained that the goal is to optimize talent deployment to meet market demands rather than simply removing employees who are not actively contributing.

As the IT sector continues to navigate these challenges, reducing bench sizes and improving utilization rates will likely remain a key focus, reflecting the industry’s need to adapt to slower growth while maintaining efficiency and competitiveness.