India Inc turns thrifty with staff spend

Faced with a difficult operating landscape, Corporate India turned frugal in fiscal 2014-15 and recorded the lowest rise in employee costs in at least three years.

An analysis of 336 companies from the BSE 500 Index that have declared their results so far shows that employee costs grew 10.3 per cent in 2014-15. The wage bill grew 28 per cent in 2013-14 and 16.5 per cent in 2012-13. The tepid rise in employee costs during 2014-15 is partly due to the meagre 3.4 per cent increase in revenue and 6 per cent contraction in earnings. But even as the absolute wage bill has been moving up over the last few fiscals, there has not been too much change in the bill when viewed as a proportion of revenue. Employee costs as a percentage of sales have crept up from about 8 per cent in fiscal year 2013 to 9 per cent in fiscal year 2015.

So, which sectors have been better paymasters last fiscal? Companies from finance and logistics segments have recorded a higher growth in wage bill compared with the previous year. Auto-ancillaries is another sector that has managed to retain a high growth in employee cost. Almost all other sectors recorded lower growth.

Non-banking financial companies recorded the sharpest increase in employee costs, at 23.3 per cent in 2014-15, way above the 14.7 per cent growth in the previous year. The most generous in the sector were Repco Home Finance, Edelweiss Financial Services and Shriram City Union Finance. In financial services, salary hikes rather than an increase in headcount led to an increase in employee costs, according to Rituparna Chakraborty, co-founder and Senior Vice-President, TeamLease Services, a recruitment company. However, banks seem to be cutting down on their employee costs. The wage bill of banks was up just 9 per cent in fiscal year 2015, down from 16 per cent the year before. Private sector banks such as Axis Bank, HDFC Bank and IndusInd Bank reported wage bill increases of 15-22 per cent last fiscal — much higher than the 4 per cent rise at the country’s largest lender State Bank of India.

Logistics companies appear to be cashing in on their improved prospects by upping employee expense too. Companies such as Allcargo Logistics and Blue Dart Express saw their wage bill move up 18-21 per cent in 2014-15, slightly higher than the 16-17 per cent growth in revenues.

The IT sector, traditionally the biggest employment generator, saw the growth in wages slacken from 28 per cent in 2013-14 to 14 per cent in 2014-15. TCS recorded a sharp 30 per cent rise in employee costs in 2014-15. But this was the result of a massive one-time bonus of ₹2,628 crore for its employees. However, its competitor Infosys’ employee expenses grew a paltry 3.4 per cent.

The wage bill for the automobile sector rose by 19 per cent last fiscal, surpassing the 13 per cent growth in revenues. But this was way below the 28 per cent rise in employee costs in the year before. Maruti Suzuki India, Bajaj Auto and Hero MotoCorp posted 17-27 per cent growth in employee expenses last fiscal.

On the other hand, sectors such as construction, textiles, realty and capital goods (electrical equipment) saw their wage bill ease in 2014-15. This, according to Asim Handa, CEO of Gi Group India, is reflective of the tepid economic activity in these sectors. The fall in the wage bill was accompanied by a drop in revenues for the capital goods (down 12 per cent) and construction (down 2 per cent) sectors.

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