Wage growth dips to its slowest since 2009
Year-on-year growth in employee cost of 362 BSE 500 companies is the lowest since 2009, at 13.8% in 2014-15
Mumbai: Wages of employees and headcount in most companies have remained stagnant, particularly in the core sector, where most firms are witnessing a decline in their sales over the past year.
Data compiled by Capitaline shows that year-on-year growth in employee cost of 362 BSE 500 companies (excluding IT, finance, banking, trading and services) is the lowest since 2009, at 13.8% in 2014-15.
On the other hand, employee cost in terms of net sales is at its highest in a decade, at 10.75%, because of shrinking net sales even as manpower costs have largely remained stable. In 2013-2014, employee cost grew at about 28.5%, while employee cost to net sales stood at 9.95%.
Experts say that while the cost of employees has been adjusted to the slow growth in sales, most companies have ensured it does not remain stagnant.
Companies are hopeful that sentiments will improve on the back of government initiatives and the job market is likely to open up by the end of the year.
“Salaries have remained stable. New employment in the industrial and manufacturing sector has come down in the past 18-25 months. In these sectors, the employee base has remained the same and in some of the companies headcount has even reduced,” said Sandeep Chaudhary, chief executive officer, Aon Hewitt, an HR consulting firm.
Besides, experts say increments have been nominal in fiscal 2015, about 7-8%, with most companies trying to consolidate and getting stringent on increasing headcount.
“Everything is directly proportional to how the economy is performing. For most manufacturing companies, only 65-70% of capacity is utilized. When demand is not picking up, there is no reason to operate plants at full capacity. This indirectly impacts the employment pattern,” Chaudhary said.
Also, companies such as Essar Ltd are trying to consolidate their workforce and have adopted strategies such as outsourcing most non-core jobs to contractual employees. Such steps have helped control manpower costs while shifting focus to the overall efficiency of the company.
“There has been a greater degree of transactions getting outsourced, as a result of which they do not get accounted for under the head of manpower. But this doesn’t mean that business is not moving and that there are not enough people working. It just means that there are not many people working under the company’s own rolls,” said Sujaya Banerjee, chief talent officer and senior vice-president (human resources) at Essar.
She said most companies in the core sector have been impacted because of the global slowdown in the past two-three years. This is reflected in their declining net sales. “Though sales have fallen, manpower cost in the interim remains the same. Unless one carries out a rationalization, you typically keep your people. So organizations are in a consolidation phase hoping that when the economy comes to buoyancy, they are prepared,” Banerjee added.
Sharing a similar sentiment, Joseph Devasia, managing director of Antal International, a recruitment agency, said business confidence was at its lowest last year. However, it has started to move in a positive direction since the beginning of the year.
“The government has just come. There was sluggishness with the exit of the previous government. A few measures hadn’t taken effect during the first eight-nine months of the year. There was very low confidence overall,” Devasia said. He said while hikes were lower last year at about 7-8%, this year they are likely to improve to 8-10%.
This story appeared in Mint on June 15, 2015