Analysis of Employee Retention Issues in Indian IT Sector

This report delves into the critical issue of employee retention within the Indian IT sector. It begins by establishing the significance of human resource management in the context of globalization and the competitive market landscape. The report then provides an overview of the Indian IT industry, highlighting its rapid growth and importance. The core of the report focuses on the challenges of employee retention in this sector, including the shortage of skilled labor, high costs associated with turnover, the impact on employee morale and motivation, the need for continuous training and development, and the influence of market reputation. Finally, the report offers recommendations for addressing these issues, such as establishing a strong employer brand, providing competitive compensation and incentives, strengthening recruitment processes, and implementing effective performance management systems. The report uses secondary data to support its arguments and provides a comprehensive analysis of this important topic.

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Employee Retention Issues in Indian IT Sector
MANAGING PEOPLE AT WORK –
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Employee Retention Issues in Indian IT Sector
Table of Contents
Introduction.....................................................................................................................................3
Human Resource Management Issue...........................................................................................3
Indian Information Technology Industry......................................................................................3
Challenges of Employee Retention in the Indian IT Sector................................................................4
Recommendations for Dealing with Employee Retention Issues......................................................7
Conclusion........................................................................................................................................9
Bibliography...................................................................................................................................10

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Employee Retention Issues in Indian IT Sector
Introduction
Human Resource Management Issue
Human resource management is a concept that deals with the workforce or the human
element of a business organizations. Human resource management aims at optimising the
performance levels of individuals by helping business organizations in improving the work
conditions for them and by establishing effective relations between employers and
employees (Noe, Hollenbeck, Gerhart, & Wright, 2017).
Since the spread of globalisation and liberalisation, the competition in the market has
become really tough. Business operations have started expanding their operations overseas,
which is forcing their rivals to think of strategies that could help them in coping up with the
changing trends. Business organisations have become vulnerable to a number of internal
and external environment factors, which can change and shape the future of an industry in
real time. One such factor that has been disturbing the operations of a number of industries
is the high labour turnover rates or the inability of the business organisations to retain their
talented employees (Johnson, 2018). Therefore, in this report, we will discuss the issue of
labour retention and turnover rates in the Information Technology sector in developing
countries.
Indian Information Technology Industry
India is one of the largest developing countries and has become an obvious choice for
business expansion for almost all multinational organizations. Information Technology
industry has been booming in India since the last few decades and is estimated to reach
around USD 350 Billion by 2025 in terms of revenue. India is favourable for IT growth and
expansion because it has abundant resources available at competitive costs (Singh, 2018).

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Employee Retention Issues in Indian IT Sector
The Indian IT sector is facing a number of issues at present but one of the major issues that
is having an impact on the India IT companies is the employee retention in the industry.
Employee retention is defined as the ability of a company to prevent its employees from
leaving the workplace to join another company . The Indian IT sector is facing high labour
turnover ratios because of a shortage of skilled employees, economic growth and employee
turnover. Due to a shortage of talented employees in the market, exclusive talent is being
poached by competitive business organizations, which is increasing the difficulties of
business organizations operating in the Indian IT sector (Kumar & Kavitha, 2018). Further,
the Indian IT sector employees are in a demand all over the globe because of their talent
and commitment to their work, which further adds up to the problem.
In this report, we will discuss the impact that the issue of employee retention will have on the
companies operating in the Indian IT sector and how can they deal with the issue. We will
also use data from secondary sources to gain knowledge about the best practices and
strategies that Indian IT sectors are implementing to ensure high employee retention rates.
Challenges of Employee Retention in the Indian IT Sector
When a business organisation recruits a new candidate, it invests a lot of resources in its
candidate for his development and to turn them into high performing employees and no
company would like to lose such an employee to a competitor. Further, an employee quitting
an organisation leaves a void , which has to be filled through external or internal recruitment
methods sooner or later. As a result, retaining employees is important for business
organizations, especially for the ones that are operating in a tough market like the Indian IT
sector. The challenges of retention issues on the Indian IT sector companies are:
Shortage of human resources:
Shortage of human resources is one of the biggest challenges that is faced by the IT sector
companies operating in India as a result of employee retention issues. IT companies that are

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Employee Retention Issues in Indian IT Sector
not able to retain its employees start experiencing a shortage in their labour after a while.
Shortage of labour makes it difficult for a company to perform its day to day operations and
processes, which can have a negative impact on the overall performance level of an
organisation (DEEPA & STELLA, 2012).
Cost factor:
A great challenge faced by business organizations operating in the IT sector, with respect to
employee retention, is the cost factor associated with an outgoing employee and getting a
new employee on-board. An employee leaving a business organisation leaves a void in the
human resources and the company becomes bound to fulfil that void sooner or later. Most of
the times, business organizations have to look at external recruitment methods, which can
be a huge burden on the finances of a company (Valluru, 2015). The U.S. Department of
Labour concluded that to fulfil the vacancy caused by a leaving employee, a company can
have to bear a cost of around 33 percent of the new recruit’s salary. This implies that
business organizations experiencing issues in retaining employees can have to spend
millions of dollars every year to keep their workplace properly staffed.
Further, business organizations invest millions of dollars in training and developing their
employees over a period of time. When these employees leave their organizations, the
resources invested in them by their companies are also considered as a loss or a cost factor
challenge in employee retention issues. Therefore, the cost factor associated with employee
turnover and retention can be a huge burden on the finances of a company and can make it
less profitable in the longer run (Nair-Ghaswalla, 2018).
Lower employee morale and motivation:
As discussed above, one of the greatest challenges of a company’s inability to retain
employees is shortage of workforce in the workplace. When a company is not able to keep
its workplace adequately staffed, its employees start experiencing the burden in the form of

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Employee Retention Issues in Indian IT Sector
extra work. The remaining employees have to perform increased duties and responsibilities,
which increases their work load. Employees have to put in extra efforts for the success of
their organisation, which can sometimes disturb the balance that they have between their
personal lives and work lives. As a result, the employees can feel a decrease in their morale
and become more likely to experience burnouts (Purohit, 2016). Further, such adverse
conditions in the workplace can also demotivate the employees from achieving their
performance objectives and they too can start to show a tendency to quit, which can further
worsen the situation of a company.
Herzberg’s two factor theory is one of the pioneer theories in the subject of human resource
management that suggested the impact of two types of factors on employee motivation and
dissatisfaction levels. Herzberg suggested that the absence of hygiene factors can cause
dissatisfaction amongst the employees but only motivational factors can have an impact on
their motivation levels. The hygiene factors are company policies, relationships, work
conditions ,salaries, etc. whereas the motivators are achievement, responsibility, the work
itself, etc. According to the theory, the work conditions in the above case can cause
dissatisfaction amongst the employees and their motivation levels can also suffer
(Alshmemri, Shahwan-Akl, & Maude, 2017).
Training and development:
An employee working in a company for a long period becomes an important asset for the
company. Such an employee would have complete knowledge about the culture and the
operations of the company. When such an employee takes a decision to quit, a new
employee who joins the company in his place would not be as productive as his
predecessor. As a result, business organizations are required to invest heavily into the
training and development of their new candidates (Jain & Tandon, 2014). The cost of
orientation programs, coaching and mentoring can be a huge burden on the company while
the loss of talent and productivity is another deficit that has to be taken care of.

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Market reputation:
In the contemporary business world, having a strong reputation in the market as an
employer is as important as having a good brand reputation amongst the customers. Only
those business organisations can attract and retain a talented pool of employees who have a
strong market image as an employer. A company that is experiencing high employee
turnover ratios will definitely feel an impact on its brand and it would become difficult for such
a company to attract and retain talented candidates in the future (Khera & Divya., 2018).
Recommendations for Dealing with Employee Retention Issues
India has become a hub for Information Technology expansion and development because of
cheap availability of talented and committed employees. No IT sector company, operating in
India, wants to lose its employees to its rivals because it is through the employees that these
companies are trying to achieve competencies in the market. Certain managerial and
organisational responses to employee retention issues in the Indian IT sector are discussed
below:
First of all, business organisations in India are trying to establish themselves as a global
brand to attract and retain a talented pool of employees (James & Mathew, 2012). India is a
developing country and Indians have a need to gain recognition in their society by getting
associated with business organizations that have a global presence and are leaders in the
market. IT sector companies like Google, Infosys, TCS, etc. have worked really hard in
occupying the top positions in the industry and have also become employers of choice by
implementing cool workplace cultures, offering meaningful work to the employees,
implementing high-touch communication strategies, etc. Such strategies have helped them
in offering a value to the employees who have then shown a greater tendency to stick to
their companies (Vorhauser-Smith, 2013).

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Employee Retention Issues in Indian IT Sector
Secondly, India IT sector companies have been offering competitive salary packages and
incentives to their employees in order to retain them. In the past, most of the studies have
already concluded the importance of salary packages for retaining employees and business
organisations are using these findings to ensure high retention rates. IT sector companies
are offering travel discounts, flexible leave options, health insurances, education leave,
telecommuting, etc. to their employees in order to keep them motivated and committed to
their organizations. The decision of salary and incentives is based upon the Maslow’s need
hierarchy theory, which suggests that in order to keep an employee motivated, his or her
sets of needs have to be fulfilled (Fallatah & Syed, 2018). Therefore, these companies are
trying to identify the needs of the employees and are fulfilling them to keep the employees
motivated, which ultimately leads to higher retention rates. Such strategies have ensured
high retention rates for business organizations (Basu, 2015)
Thirdly, Indian IT sector companies are strengthening their recruitment process and are
setting out clear expectations and requirements for their candidates. Business organizations
are trying to find the right fit for the right job so that the candidates do not feel out of place
and show a tendency to quit. Google, one of the top multinational IT company, has set out
clear expectations in India. In India, Google is looking for only Type T personality (thrillers,
risk-takers and doers) candidates, which will suit its work culture while it asks other
candidates to not to even apply for a job (Lombardo, 2017).
Fourthly, performance management systems have been proving as an effective tool to
ensure high employee retention rates. Facebook, a billion dollar brand, uses a unique way of
ensuring employee retention. The company conducts check point performance reviews on a
semi-annual basis where it analysis the performance of its employees and checks if they can
be given additional responsibilities and compensation packages for the good work that they
have done. Apart from that, to deal with underperformers and to ensure retention, the

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Employee Retention Issues in Indian IT Sector
company offers them additional incentives to improve performance rather than penalising
them (Ray, 2017).
Fifthly, making the job interesting itself has been one of the best strategies to ensure high
retention rates in the Indian IT sector. HCL technologies, one of the top multinational
companies, has implemented a strategy known as idea-preneurship. Under this strategy, it
allows its employees to come up with innovative solutions to the problems that are being
faced by the customers. The ideas for problem solving are co-created and co-implemented
by different teams (Bhattacharya & Chaturvedi, 2013). Such a strategy not only promotes
team work and empowers the employees, but also help in making the job more interesting
for the employees and retaining them in the long run.
Conclusion
Without a doubt, employee retention is an important issue that is being faced by business
organisations operating in the Information Technology sector in India. The challenges
associated with low retention rates makes it imperative for business organisations to look for
strategies that can be helpful in dealing with high labour turnover ratios. Therefore, IT sector
business organizations can look into the above recommendations and gather knowledge
about the strategies that the market leaders have been implementing to retain their talented
employees. Based on these strategies, IT sector companies can design their own strategies
that would help them in retaining employees and bringing down labour turnover rations to
ensure market success.

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