Employee retirement benefit costs up 45% for top-100 cos: Study

Indian companies seem to be facing a sharp rise in their liabilities towards employees’ retirement benefits and the cumulative figure for the top-100 firms grew by 45 per cent to Rs 2,90,000 crore last fiscal.

According to a study conducted by Towers Watson, a global risk management and human resource consultancy major, the combined estimated liabilities for employee benefits across BSE-100 companies was Rs 2,90,000 crore as on March 31, 2011, as compared to Rs 2,00,000 crore in the year-ago period.

Liabilities for employee benefits for India Inc are long-term in nature and comprise of retirement provision made by the companies.

Provident Fund and gratuity are two mandatory retirement benefits for employees in India. Besides, gratuity, defined benefit (DB) pension, leave benefits and other DB plans can also be termed as liabilities for employee benefits in India.

“While the liabilities of companies have increased significantly in the last one year, the proportionate rise in assets has not been commensurate.” Towers Watson India Director, Client Account Management, Mr Kulin Patel, said.

The significant rise in liabilities is likely to have a direct impact on profits, the report said.

“Employee benefits liabilities would continue to increase as companies grow and this becomes all the more important if the economic environment is uncertain. Going forward, companies should be more vigilant about how their liabilities develop relative to company financials,” Mr Patel added.

Consistent with findings over the previous years, public sector banks have the largest risk by far of the extent of liabilities against their finances.

The liabilities for the banks as a collective within the BSE 100 have increased almost two-fold to Rs 10,500 crore as on March 31, 2011, from Rs 6,154 crore as on March 31, 2010.

“This could be due to the liabilities fully reflecting the impact of wage revisions and employees taking advantage of the second pension option offered by the bank into the defined benefit pension scheme,” the report said.

Far behind the banking sector, the oil and gas segment within the BSE 100 takes the second position with average benefit liabilities at Rs 1,884 crore as on March 31, 2011, compared to Rs 1,680 crore as on March 31, 2010.

The average sectoral liabilities as on March 31, 2011, for the other sectors such as IT stood at Rs 514 crore, followed by telecom (Rs 411 crore) and power (Rs 262 crore).

Moreover, the unfunded employee benefit liabilities have more than doubled to Rs 58,000 crore as on March 31, 2011, as against Rs 28,000 crore as on March 31, 2010.

The findings are based on an analysis of pertinent statistical data found in the annual reports of 95 of the BSE 100 companies and in particular notes to accounts related to employee benefits costs and liabilities.

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