For many of India’s top companies, sales and profits are not growing as fast as their wage bill.
Already hit hard by the downturn, India Inc saw its employee expenses spiral in 2012-13.
The wage bill of leading companies that make up the index of BSE 500 stocks expanded 16 per cent, growing faster than profits, which increased 7 per cent, and revenues that grew just 11 per cent.
Particularly badly hit were companies in sectors that have seen a fundamental shift in fortunes, for instance, mining, telecom, and computer education. The firms have raised wages or continued with hiring with an eye on long-term prospects.
Spending in a slowdown
This is the first time in the last four years that employee costs have risen faster than both revenues and profits. Sectors that took a hit to their core business due to external factors shelled out more wages.
One example is the mining sector where sales shrank 10 per cent, but the wage bill went up 8 per cent. Coal India renegotiated wages last year and this increased its annual wage bill by 12 per cent.
Computer education also figures among sectors that reported sagging profits and rising wages. Employee costs shot up 38 per cent, while profits tumbled 75 per cent and revenues dropped 7 per cent.
The telecom sector’s wage bill ballooned 18 per cent, while profits halved. Employee expenses were up 36 per cent in the refinery sector, though profits remained flat.
Notable exceptions, where profits outpaced the wage bill, were the financial sector, besides telecom equipment, entertainment and FMCG segments.
Lower wage bills
On the other hand, distressed or debt-laden sectors trimmed employee expenses. Key among these were air transport services, which reported a 10 per cent fall in employee expenses primarily due to lower wage bill for Kingfisher Airlines.
Still, wages made up 70 per cent of Kingfisher Airlines revenues, up from 12 per cent last year.
Realty companies reported a 4 per cent reduction in the wage bill, with profits falling by 10 per cent.
Headcount growth
In sectors where the employee bill makes up a critical portion of the cost, the wage bill expansion was more moderate. IT companies, for instance, saw a 12 per cent increase in their wage bill, prompted both by new hires and increases for existing staff.
Wage expense at Infosys was higher by 29 per cent while Tata Elxsi and TCS reported a 26 per cent jump on fresh hiring and increments.
Salary Primer 2013, a research study on the hiring market by HR services firm TeamLease, showed that in FY13 hiring for corporate India as a whole increased 11 per cent compared to a year ago, while increments averaged 12 per cent.
The study also indicated that certain sectors such as FMCG and pharmaceuticals had higher pay raise for many of the job profiles.
Certain jobs such as motor mechanic and medical representative commanded increments of up to 17 per cent, much higher than other jobs in the same sector.