Tech firms' temp worker costs dip as demand falls

India's top IT services companies have finally managed to get a handle on temporary staff costs that had soared in the wake of the pandemic outbreak.

At Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, and Wipro Ltd, sub-contractor expenses as a percentage of revenue in the December quarter dipped to below or near levels that prevailed before the outbreak.

At TCS, HCL Technologies, and Wipro, sub-contractor expenses accounted for 6.14%, 13.12%, and 11.61% of revenue in the third quarter, falling below 7.75%, 13.4%, and 14.49% they reported in the January-March period of 2020. At Infosys, these expenses were a tad higher at 7.89% at the end of December, against 7.32% in the March quarter of FY20.

Spending less on temporary workers is one big lever to improve profitability for IT companies, given that salaries account for 60-65% of their expenses, with sub-contracting costs alone accounting for 6-13% of total expenses.