How longer notice periods are backfiring for IT companies

A tool which IT firms thought would help maintain continuity has actually become a bone in the throat for the whole industry and is making recruiters work double

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Renuka, who has just started her career as a programmer with two years of experience, has put in her papers at her current job. Why? Because she has a much better opportunity in hand.

As per company policy, she is required to serve a three-month notice period before she joins her new employer. Now, this gives her a nice long window to look for other opportunities in the market, and so, she keeps applying. She lands three more interviews and manages to bag two more offers.

By the end of her notice period, Renuka has three offers in hand, from which she has to select one. Since she is not really looking for too much of a hike, she joins a company which gives her the flexibility to work from anywhere. The lack of flexibility in her current job has been irking her, and the other two offers did not promise her flexibility. She was clear about what she wanted, so the choice was easy.

Another software engineer, Suresh, who has been working in the IT sector for the past four years, has put in his papers as he has a much better offer in hand. Again, being part of a critical client project, he needs to serve a long notice period of four months. During this period, he keeps applying and bags five job offers. With his current employer desperate to retain Suresh, he is given a promotion along with a 50 per cent salary hike. Suresh was really aiming for a higher position and a designation he could be proud of. Therefore, he decides to stay.

“When employees resign, they anyway switch off and stop working at full capacity. Therefore, I do not really see any point in holding them back for too long”

Sailesh Menezes, CHRO, HPE India

Aman, who has just been recruited by an IT firm from campus as a junior software engineer, is not unhappy with the work culture. He finds the workplace toxic and his manager rather nasty. He puts in his papers and uses his three-month notice period to find better opportunities. He manages to receive six offers!

After careful evaluation, he decides to accept the offer from a fairly popular MNC brand known for its liberal and employee-friendly policies in India. He is drawn by the brand name and a positive culture.

In all the three aforementioned scenarios, the employees had more than one job offer in hand. All three had the liberty to choose the best option as per their requirement. This phenomenon is called ‘offer shopping’, and the term is commonly used in the HR community.

The one common factor in all these three cases is the long notice period, which the employees were able to take advantage of.

While long notice periods are common in many industries, IT companies are particularly known for their fairly longer notice periods, which may, at times, extend up to six months.

Longer notice periods are known to lead to the issue of ‘offer shopping’, and many companies in the IT sector are seeing a rise in their offer drop ratio, which stands at 50 per cent on an average, say all HR leaders that HRKatha spoke to. “This is like a waste of efforts for everyone. Recruiters are actually giving 20 offers to fill 10 positions. That is because, on an average, they know that half of them will drop out,” says Vivek Tripathi, VP-HR, Newgen Technology.

Many of the staffing agencies in India have estimated that in IT, dropout ratio stands at about 50 per cent, while other industries are facing a drop-out ratio of about 35-38 per cent.

“People put in just 50 per cent at work during their notice period and keep looking out for more offers”

Vivek Tripathi, VP-HR, Newgen Technology

All HR leaders believe that a long notice period is the reason for the increase of drop out ratio in the IT sector. “Organisations should think about reducing their notice period to curb this problem,” mentions Anurag Verma, VP-HR, Uniphore.

Why long notice periods are not a good Idea

“I was never really a fan of long notice periods,” shares Sailesh Menezes, CHRO, HPE India. “When employees resign, they anyway switch off and stop working at full capacity. Therefore, I do not really see any point in holding them back for too long,” justifies Menezes.

Tripathi has observed that people serving their notice period actually just work at 50 per cent capacity. “They put in just 50 per cent at work and keep looking out for more offers,” states Tripathi. “One they have put in their papers, these employees have nothing to really look forward to. Then what is the point of holding them back? If one is unable to retain the talent in a week’s time, it is not a good idea to hold that person back for another three months,” advises Tripathi.

Since employees do not really put their heart into the work during their notice period, HR leaders believe longer notice periods serve no purpose.

The major reason why companies started having longer notice periods in the first place was to ensure business continuity. “Longer notice periods came into existence majorly to maintain business continuity. After all, the employees are not working for the business per se. They are actually working for the clients of the organisation. Therefore, to avoid sudden or abrupt disruptions in the project, companies rely on longer notice periods,” explains Menezes.

“Organisations should think about reducing their notice period to curb this problem of offer shopping”

Anurag Verma, VP-HR, Uniphore

The solution

For all HR leaders, long notice period is an industry-wide issue. “The problem of job shopping is not new. However, the industry has never really talked about it much, and it is high time they did,” cautions Menezes.

It is the common opinion of HR leaders that all industry leaders should come together and fix an apt notice period, which can range from anywhere between two weeks to one month. Of course, Menezes does realise that there will be challenges.

“One major issue would be business continuity,” points out Menezes. However, he also suggests ways to overcome it.

Long benches: Companies can look to have longer benches. Although this would definitely cost more, it is an option worth considering. “Countries such as the US have been able to do this successfully. They have 15 to 30-day notice periods. So why not us?” questions Menezes.

Talent management: Another solution to a shorter notice period can be having a robust talent-management system. A strong succession plan with enough people to take others’ places whenever the need arises can be very advantageous.

The problem of ‘offer shopping’ is not as prevalent in experienced employees. It is primarily the entry-level and junior-level jobs that are witnessing this problem. Replacing such talent may not be as challenging as replacing senior and critical talent. Therefore, the industry experts think this is doable.

The industry really needs to find a solution and look to reduce notice periods. “This will make transitions and hiring faster for all companies,” points out Menezes.

If corrective action is not taken soon to curb this menace of ‘offer shopping’, the whole culture of employer-employee relationship will be threatened. “Trust is anyway going down between employees and employers,” points out Tripathi.

Major industrial bodies such as Federation of Indian Chambers of Commerce & Industry (FICCI) or Confederation of Indian Industry (CII) should really look into this and consider shortening the notice period. The longer the notice period, the more harm it does to the industry.

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