Manpower costs cut deep into India Inc’s pocket

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Mumbai, Jun 21: It is not only spiralling fuel and material costs but also manpower costs that India Inc has had to deal with in the financial year 2007-08. A study of 961 large corporates carried out by FE reveals that their staff costs rose 24.1% in FY08 over the previous year and this is more than the 18.6% growth in revenues. And, the rise is widespread as 90% of the companies in the sample recorded an increase in employee costs.

Staff costs have now started eating into margins as well, as their share of the revenue is now 6.22% in FY08 compared with 5.94% in the previous fiscal. However, traditionally staff cost-heavy sectors like IT and telecom have seen a drop in the share such overheads in their total expenditure.

“An appreciating rupee and the US slowdown were clear threats for the IT industry and with a view to manage margins, most IT companies were managing staff costs proactively. And the result shows,” says an analyst with a leading brokerage.

The share of staff costs in total expenses for the IT industry has dropped from 52% to 49% in FY08. Here, India’s leading software solutions company TCS is on the forefront. It has reduced the share of employee expenditure from 60.59% of the total expenditure in FY07 to 44.51% in FY08.

On the other hand, traditionally conservative companies have seen a rise in staff costs. And this is because they have to catch up with other sectors garner the right talent, reckon experts. Sectors like aluminium, cement, electric equipment and construction sector were the ones to witness stiff rise in costs. The share of employee expenditure for the construction sector was 65.8%, steel 52.1 % and electricity 42.5%.