Manpower costs register sharp upturn during Q2

Written by Pradip Kumar Dey | Mumbai, Nov 17 | Updated: Nov 18 2008, 05:48am hrs
Rising manpower costs, in addition to spiraling input costs and interest costs, have eaten into India Inc's profitability, reveals a study by FE. The study of 2,236 large companies, carried out by FE, indicates the rampant salary cuts and lay-offs, wherever they are being undertaken, are not without reason: staff cost for corporates increased 26.9% to Rs 37,777 crore in July-September 2008, from Rs 29,774 crore in the same quarter of the previous fiscal, the study has revealed. Overall, total expenditure of the companies that constituted the study group grew 48.3% to Rs 6.28 lakh crore, from Rs 4.23 lakh crore during the July-September period year-on-year.

The study points out that expense management could be a critical area for India Inc's head honchos. This is because expenses have grown faster than revenues and have dented profitability. Sales growth in the quarter under review was pegged at 37.8%.

The study also found that 78% of the companies in the study group increased their staff costs during July-September 2008, as compared to the same period in the previous fiscal. Manpower intensive sectors like IT, tea, telecomm-unications, and power and construction, showed a high staff cost to total expenditure ratio in all the three month period. This means that they spent more on staff per unit of total expenditure. Satyam Computer, for instance, spent Rs 60 on staff for every Rs 100 spent on total expenditure during July-September 2008.

Among industry verticals, significant increase in staff costs was seen in the case of steel, solvent extraction, construction, entertainment, electric equipment, engineering and power. The aggregate staff cost of steel companies increased 78.6% (highest among the industries) to Rs 4,355 crore during July-September 2008. A significant decline in the ratio of staff cost to total expenditure was seen in the case of cement and products, fertilisers, oil exploration, pesticides, retailing, shipping, tea, telecomm and tyres. An opposite trend was seen in the case of cigarettes, IT, construction, electronics and steel.