The Price of a 90-Day Notice Period: Why Change Is Imperative
On the latest episode of Hireside Chats, a 3-Part Series, Time’s Up: Reimagining India’s Notice Period Norms For the Future of Work – we delve into India’s Notice Period Dilemma, particularly in the technology sector. We explore the historical reasons behind the standard 60 or 90 day notice periods, how they’ve benefited organizations and employees, and the significant changes in today’s landscape. Sriram Rajagopal, Founder and Director Diamondpick, shares with us his insights on the potential advantages of transitioning to shorter notice periods and the challenges associated with this shift.
This blog highlights the challenges of standard 60-90 day notice periods in the tech sector, and why we should move to a shorter notice period. Stream the podcast episode here or read on for highlights from our conversation to discover actionable insights and strategies …
Highlights:
- 90-day notice periods in IT companies can be non-negotiable, leaving departing employees stuck for three months or risking their credentials.
- Many countries like the U.S give a two-week notice as a professional courtesy, allowing employers time to find a replacement and transition ongoing projects or responsibilities smoothly. So why can’t India follow the same?
- Shorter notice periods empower employees to make informed career decisions, fostering clarity, focus, and better decision-making.
- A shorter notice period minimizes waiting times and prevents unnecessary recruitment delays.
- IT organizations are reimagining recruitment strategies to navigate today’s competitive market.
Part 1: The Long Wait: Unpacking India's Notice Period Dilemma
Sriram: Welcome to this episode of Unpacking India’s Notice Period Dilemma, particularly in the context of the technology industry. All the employment models of today have notice periods that are roughly three decades old, continuing from other industries where we have not looked at something applicable to this industry per se. Because there was a reason to create this waiting period.
Today we are going to delve into why this was there, how it helped organizations and employees, and what has changed.
A lot has changed, especially with better knowledge management tools, advent of technology and the improvements in Generative AI. A lot has changed that can work in favor of the employers and employees to make the most of the updated technology available. We will examine why some other countries operate with lesser notice periods and how they manage change with respect to attrition without that impacting deliverables in their functions. So let’s look at both – the what and why – what is the reason for this, why companies did it, why they are still doing it, what could be the alternative, why do these alternatives work in the current context of work.
Why are notice periods in India, typically in technology companies – 60 or 90 days?
I have always wondered what advantages these longer notice periods provide to an organization. In the historical context, back in the day, knowledge transition and documentation took a long time, and people needed time to find a replacement. And if every organization had the same 60 days you have somebody leaving in 60 days and you have somebody joining in 60 days – there is technically no overlap. The only way overlap happened was when somebody who was designated as a buffer resource within the same project that could potentially take over while the individual was serving notice period – when you can’t hire somebody as a replacement so you are backfilling somebody from within and having them go through the knowledge transition period and the customer is not paying for two people.
So those are some of the reasons why notice periods were longer so that you can maximize revenue opportunity at the same time make sure that all the knowledge, tribal knowledge that the individual had, is passed on so that there is no disruption to the timelines of the schedules.
Part 2: The 30-Day Shift: Strategies for Smoother Career Transitions
Sriram: With improvements in AI and AI based documentation and the way engagements are run today – you have a variety of engagements – support engagements, brand new application development, SAP, Salesforce, which don’t necessarily have any sort of dependency on the individual to carry on the activity.
Why do notice periods have to continue to remain at 60 and 90 days?
So in countries like the US you have a two week courtesy notice period. So people are able to manage whatever transition that you have in just two weeks. So it should be possible for us to do it in India as well.
During COVID, post COVID hiring surge, this was also used to – from an employee point of view – to create multiple opportunities for them. A longer notice period meant I could interview with five different companies, even if the processing time is 20-25 days. By the time I finish my notice period, I end up with about four to five jobs, and I pick the best of the best. And every time I get a new job, it’s based off of the current offer that I have and sort of, inflated the employee cost, in the last 24 months or so.
So, lesser notice periods actually help companies process the candidature of one single candidate and they don’t have enough time to go and pursue multiple opportunities simultaneously, considering that not everybody can process an offer within that entire 30 day time period.
So it keeps the cost as low as it can be, so it doesn’t allow for an unreasonable inflation increase and pay disparity between internal employees and new hires coming in. So that’s one advantage of a shorter notice period.
When you don’t have demand, when you have a lot of people on the bench. Having a longer notice period means that you have to pay for a longer time. So you can avoid that by having notice periods that are in the 30 day time frame. So people have the opportunity to look out and at the same time, companies will be forced to make their processes a lot more efficient to find that talent within that time frame.
From an employee perspective also, a shorter notice period helps make things easier. So, if I’m deciding to leave an organization, I prepare, I analyze the organizations that I want to be part of and once I hit the button, I know I have 30 days within which I need to find something else. So I have, I apply much better clarity around career expectations, where I can go, what I like, what I don’t like, and be fully ready when I take that jump option.
Now that you have a 60-90 day option, I can just apply to many companies, figure out who’s hiring, who’s not hiring. In a shorter notice period you will be forced to make that choice very clearly, you will have to do that research before, you know, arriving at that decision to leave an organization and, that sort of promotes better decision making, more informed decision making on part of the employee. And that sort of helps, careers, or individuals, it shapes the way they want to manage their careers better.
Part 3: Unlocking the Benefits: Why Shorter Notice Periods Are the Way Forward
So from an employee’s perspective, you know, the longer notice periods, like I said before, allowed for a proper transition. So today with the advent of AI, and Gen AI, a lot of the documentation is automated and copiloted. So if there is no dependency on the individual to continue work without having an impact on the deliverables of the organization, it will tend to optimize your spend by having shorter notice periods. And for employees who don’t want to stay in the organization, you don’t really need to prolong the agony of staying in the organization just because the notice period dictates that you have to stay for a long period.
So it works both ways. So you can call it quits in just four weeks time and then move on to your next gig. So I think the job market will be a lot clearer on what people want. The process will streamline itself and run a more efficient and responsible recruiting engine.
That’s one of the outcomes that you can see if notice periods are reduced to 30 days. Because you have to make it happen within the 30 day time frame. So the candidates will upskill themselves, make them a lot more relevant, for the job opportunity that they’re going for. It will reduce the amount of fraud, because like I said, so you get a lot of help and you have a lot of time when you have really limited time, then you have to sort of be at the top of your game to make the right impact the first time, because you’re not going to get four to five options to try.
I feel that, in a market today, say two years back, it was a candidate’s market. So you could pretty much dictate whatever you want and that sort of makes the industry competitive, and with a more streamlined notice period and a shorter notice period it allows for less juggling of such jobs and makes the cost a lot more palatable and more streamlined, more linear.
From an employee’s perspective – there’s a lot of tools that one has to provide to ensure that there is a continuance of benefits. So I think there’s some changes one needs to make in the policies. To accommodate, let’s say, continuance of medical benefits like COBRA in the US
So there are certain tweaks that one has to make, a shorter notice period a reality, but it’s sort of in my opinion, it’s beneficial to pretty much all the parties involved in the long run, because India is traditionally grappled with a limited number of employment models. Even as a FTE, or a contractor. Freelancers are not mainstream yet, and gig is not mainstream yet because of various reasons around security, data, privacy, protection, IP, and so on and so forth.
Since COVID showed the way, organizations can classify what needs to be a real full time job, what can be a contractual job. What can be just in time, what can be purely a marketplace driven activity then it’s easier to engage with that talent accordingly. So today we don’t see the emergence of such marketplaces because organizations are not willing to explore beyond tried and tested models that they’re comfortable with,because of the risk of not having these explored yet.
But once somebody starts I’m pretty sure there will be a market for people who can just learn their skills for the time that they spend on a given activity. And, perpetually be that mode forever because there are people who want to grow and have aspirations, who have career milestones. There are some who don’t. So how do we sort of equally engage both and pay for the skill that we’re pushing in, pay the premium for the skill that they bring in, and provide each of them their own space. So that’s what I would advocate, right? So shorter notice period, create more than one, employment model for organizations to explore.
In that way, you’re not adding capacity just because you can, and then you have to shed that capacity when you don’t have demand. And so you can leverage a much larger industry bench, rather than have it all in house and then being the consequences of excess capacity, on the markets, not in your favor.
The current model of talent fulfillment in IT organizations largely depends on building an in-house security team. Or upskilling somebody that’s already available to the newer skill that you want them ready on, or hire from campus and get them ready or go to a partner who can help you for this. But, for a vast majority of internal recruiting functions and the partners with the system, the available market is the same from now on. It’s about how you’re able to curate, how you’re able to understand the demand, how you’re able to validate skills, and then provide the most relevant candidate to the most relevant opportunity.
So, organizations will have to either look at migrating to a credentialed talent pool, over time because right now they are, everybody’s in a hurry to fill those positions to make their schedules work and projects and, you know,work delivered on time. But how the effort involved in the whole sourcing screening, getting them to that point where you can pick that one person.
So the yield is all as low as 2-3%, and we start with a hundred candidates at the top of the funnel, you’re looking at 2% at the bottom of the funnel. And if the data effort is going to go inside then we just, and looking at a huge amount of cost being spent finding the 2% out.
What if we can identify the 2% beforehand? And then the entire effort is just expended in communicating the opportunity and so it reduces almost 60-70 percent of the overall hiring effort if it is preempted in a way that is matched to the hiring context of the organization. And so companies will have to either invest in tools or partner with companies that provide these tools to ensure that they minimize all that other 70-80 percent of the noise of the not 100 percent relevant candidates coming through to your doorstep.
How can organizations move from 60 or 90 days to a 30 day long notice period?
Obviously, it’s going to be very difficult to implement it on the existing workforce without it and it will involve a lot of noise. The easiest way is to actually make sure that all new hires come in with any policy. And once that you have one that states that everybody that’s coming in typically what we’ve seen is in a three year horizon with industry, hoping to get back to a 10% growth rate next year and 15 % attrition.
In a three year time frame, 75 percent churn happens over the next 3-4 years, so you will have the majority of the people that, work for you in, in the new policy, and therefore, you know, you can start small just by impacting people that are coming into the organization, start making it after the particular ones that are already inside.
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