The Hindu Business Line : One in three cos cuts employee costs in March quarter

One in three companies has witnessed a decline in its wage bills in the March 2009 quarter as against the quarter ended March 2008. This is the finding of a study of results announced by a sample of 150 companies in the BSE 500.

On the other hand, another one-third of these companies saw employee costs increase by over 25 per cent during this period.

The above sample excludes public sector companies (mainly banks in the above universe), that have made provisions under the new wage bill and IT companies whose employee expense also spills over into the selling and general administrative expense category.

Wage hikes

Overall, employee expense for this sample was 8 per cent higher in the March 2009 quarter over similar costs in March 2008.

What is clear is that Corporate India does not appear to have resorted to any large hike in wages in recent months given the effect of the pronounced slowdown in the last couple of quarters.

On a sequential basis, the employee costs for March 2009 have declined by about 7 per cent (compared with the December 2008 quarter). This suggests that hikes, if any, post-March 2008, may have been made in the earlier quarters of June or September 2008, when the effects of a slowdown were not apparent in the financial performance of companies.

Reasonable growth

Sectors such as consumer goods and cement that have managed reasonable growth over the past year are the ones that have seen an increase in personnel expenses on a year-on-year basis. Technology companies such as Bartronics and Educomp Solutions that are in niche markets also comfortably hiked their wage bills.

Cutback in costs

However, financial companies such as IDFC and Reliance Capital cut back on the costs incurred on employees on the back of a less encouraging financial performance.

The above overall trend could undergo a change once the numbers of slowdown-hit sectors such as capital goods and real estate are announced.