Wednesday, August 23, 2006

India Inc will have tough time retaining staff: study
Financial service sector foots highest wage bill, followed by IT and media
Manoj Kumar

It costs more to hire and retain talent and the trend is likely to catch up as employee aspirations, coupled with expansion of the economy, exert further pressure on corporate wage bills in the next few years, an ASSOCHAM Eco Pulse (AEP) Study has indicated.

Staff cost (in lakhs)

Company        Q1 2006    Q1 2005    Percent change

Essar Steel     24.71         20.75       19.08

JSW Steel       39.59        31.94         23.95

Tata Steel      406.1         377.55       7.56

SAIL              1657.96      1439.17      17.70

The AEP analysis of about 100 corporate firms shows that the financial services, media and information technology will continue to face immense challenge in hiring, training and retaining staff.

The sector-wise trends reflect that the employees in these three areas have much higher propensity to change jobs, seeking better wage packages, which poses a continuous challenge of managing attrition for the personnel directors. Besides, fast expansion in the
economy is also one of the major reasons for the wage bills shooting up.

The study finds that the financial services sector had to bear a higher salary cost of 54.73 per cent for the April- June period of 2006-07 than over the same period last year. This sector was closely followed by the IT sector, which saw a rise of around 44 per cent in wage bills.

Media firms, including those engaged in production of television serials and Bollywood films, were the next in paying higher wages, their cost on this account having gone up by 29.56 per cent.

The staffing costs in the media, IT and financial service firms has outpaced the increase in the net profit.

Thanks to the aggressively expanding retail business of the financial institutions necessitating the increased manpower, the staff cost in this sector has shown a tremendous increase.

The magnitude of increase can be judged by the figures of fast-expanding Indiabulls Financial Services that exhibited 262.44 per cent rise in its staff cost.

Firms like Geojit Financials, IL&FS and CRISIL also registered a rise in their wage bill by 82 to 85 per cent.

The Indian IT sector has been witnessing large number of acquisitions in the recent past. This fast paced expansion has led to a tremendous rise in their staff cost (43.87 per cent), even higher than their bottomline (32.56 per cent).

Infosys topped the list, recording an increase of over 53 per cent. Patni Computers saw a rise in its wage cost by 21.65 per cent with a tremendous decline of over 129 per cent in its net profit.

Among the media firms, the overall rise in the net profit for the quarter under review is merely four per cent whereas the figures for rise in staff cost was over 29 per cent. Balaji Telefilms faced a severe rise in its staff cost of over 251 per cent. Firms like Cinevistaas, UTV, Zee Telefilms, Mid Day Multimedia and TV Today saw huge drop in their net profit, partly because of enhanced expenses on employees.

In the pharmaceuticals sector also, there was a rise in the wage cost of 18.62 per cent. Panacea Biotec recorded a tremendous rise of 132.52 per cent in its bottomline as well as a hike of 108.20 per cent in its staff cost during the quarter under study.

Research and development form the core business activity of this sector and recruitment of skilled manpower is a necessity. Therefore, staff cost is increasing consistently in this sector. Ranbaxy was the only firm in the pharmaceutical sector in the sample taken for the study to have recorded a decline of 4.71 per cent in its wage cost.

The automobile sector witnessed similar increase of around 18 per cent in both net profit as well as wage cost. LML recorded a major plunge in its net sales (-94.67 per cent), net profits (-43.70 per cent) as well as wage bill (-82.35 per cent). Sona Koyo, Hero Honda, Ashok Leyland, Amtek Auto saw an increase of around 23 per cent in their personnel expense.

Steel firms also saw a huge hike in its staff cost of over 15 per cent higher if compared with the rise in the net profit (3.96 per cent). JSW Steel faced maximum rise in its employee cost (23.95 per cent), whereas there was a plunge of 15 per cent in its first quarter net profit. Similar trend was noticed in Essar Steel also, which saw a rise of 19 per cent in its wage cost.