Strain's showing: India Inc hiring slowest in 3 years, up by mere 2% in FY14

Written by Aveek Datta | Yoosef K P | Mumbai | Updated: Oct 4 2014, 13:42pm hrs
JobsJob creation in fiscal 2014 was a challenge due to sluggish economic growth. (Reuters)
The combined employee strength of the countrys largest companies went up by a mere 2% y-o-y in 2013-14, growing at its slowest pace in the last three years, reflecting the strain that the economy went through in the previous fiscal.

The aggregate employee count for 185 of the BSE 500 companies for whom comparable data are available for the last four financial years on Capitaline stood at 27,85,385 in FY14, 2.18% higher than in FY13. The total number of employees on the payroll of these companies grew at much faster rates of 6.24% in FY13 and 5.6% in FY12.

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The individual headcount at some of the largest firms like State Bank of India, Wipro, Steel Authority of India, HDFC Bank and Tata Motors has, in fact, come down. Job creation in fiscal 2014 was a challenge due to sluggish economic growth that impacted businesses across sectors, especially infrastructure and manufacturing.

On the other hand, companies like TCS, which managed to do well in terms of securing new business from international clients, significantly added to their staff strength.

Interestingly, though the rate of growth in the aggregate number of employees added by these companies was menial compared to the previous years, the growth in total employee cost incurred by these companies remained the same.

In FY14, the combined staff cost incurred by these 166 companies stood at R2.56 lakh crore, 14.45% higher than in FY13. In FY13 and FY12, employee cost for these firms, as a whole, went up by 14.13% and 11.84%.

Anandorup Ghosh, director, talents and rewards, at human resource consulting firm Aon Hewitt, says that the low percentage growth in employee addition in FY14 could be a function of the fact that Indian companies hired a lot more talent in the second half of fiscal 2013, compared with the same period in fiscal 2014.

That may also explain why the growth in employee costs is similar between the two financial years, says Ghosh. Since the employees hired between October 2012 and March 2013 didn't serve for the full fiscal, costs associated with them were lower in FY13, compared to the next fiscal where they were paid for the full year.

"Another factor for growth in employee costs remaining flat between the two years could be that attrition has been low in 2013-14, Ghosh says. When an employee leaves an organisation, that person is typically replaced with a lower cost resource. Whereas if a person continues to work within the organisation year after year, they become more expensive resources as increments given to them add to costs.

According to the Deloitte Compensation Trends Survey 2014-15, the voluntary attrition rate in FY13 was 13.4%. Ghosh says that, in FY14, the rate of attrition was four percentage points lower than the previous fiscal. Attrition typically tends to be lower when the business environment is uncertain and people prefer to stick to their existing jobs for security rather than change over to a new organisation.

With a new pro-reforms government and a visible buoyancy in the capital markets, the hiring outlook for the current fiscal has improved over last year. According to the October-December ManPower Group India Employment Outlook, 44% of Indian employers expect to increase their staff strength, 37% expect status quo and only 1% see a decline in workforce.

The new employment generation over the next 12 to 24 months is likely to come from sectors like infrastructure and manufacturing, rather than financial services and information technology firms, who have been the principal drivers of employment creation in the country over the past few years, says K Sudarshan, managing partner at EMA Partners International, an executive search firm.

Not only new job creation, but even the hike in compensation expected in 2014-15 is better than what was originally estimated at the beginning of the year. Ghosh of Aon Hewitt said his firm had earlier estimated salaries to increase by an average 10%, and that forecast has now been revised to 10.6%.