Mumbai: Undeterred by slowing economic growth, Indian companies continue to hire new talent and offer increments to existing employees, according to various employment indicators, analysts and corporate recruiters.
That’s in contrast with the aftermath of the September 2008 collapse of US investment bank Lehman Brothers Holdings Inc., which triggered a global financial crisis and recession. At that time, Indian companies cut down on hiring and even trimmed staff.
An analysis of the combined employee costs of the 50 companies that are part of the Nifty, the benchmark index of the National Stock Exchange, shows that these firms spent more on their workforce in the September quarter than a year ago. Their combined employee costs rose 19.21% to Rs.56,882.44 crore in the quarter. In the June quarter, too, employee costs rose by around 20% over the year-earlier period.
Employee costs are mainly driven by workforce additions or salary hikes for existing employees, or a combination of both.
To be sure, during this period, companies may have let some employees go as well, but the net increase suggests that the expenditure on new recruitment and salary increases has been higher than the cost saved on account of layoffs.
The economy in this period has remained weak. In the second quarter of the current fiscal, India’s gross domestic product grew 5.3%, compared with 6.7% a year ago and 5.5% in the previous quarter.
Factory output growth in September was 0.4% lower than a year ago. In the April-September period, growth was a mere 0.1%.
“What followed after Lehman was a knee-jerk reaction, which companies overcame subsequently,” says K. Sudarshan, managing partner, India, at EMA Partners International, a global executive search firm. “Currently, companies are not thinking year-on-year; they are building a talent pool for the long-term as there are committed capital expenditure plans, which will shape up eventually despite short-term blips.”
The Monster Employment Index, a monthly gauge of online job posting activity put out by job website Monster.com, for October grew 13% over the same month last year. The index has been rising since July, after dropping each month between April and June.
“The double-digit gains in the Monster Employment Index reflect the confidence of Indian businesses in the current economy,” Monster.com managing director for India, the Middle-East and South-East Asia, Sanjay Modi, said in the report that was released in November. “Major sectors like IT (information technology), engineering, automotive, telecom, healthcare and education have shown positive year-on-year growth.”
A quarterly study released by human resources (HR) firm TeamLease Services Pvt. Ltd in September also reported an increase in the employment outlook index for the October-December quarter. Sectors such as healthcare, pharmaceuticals and so-called fast-moving consumer goods (FMCG), or packaged consumer goods, are contributing to the improvement in the hiring outlook, it said.
“As far as we are concerned, it is business as usual when it comes to hiring new talent,” a spokesperson for Hindustan Unilever Ltd, India’s largest packaged consumer goods company by revenue, said in an email. “We do not change the approach based on slowdown or upswing as we recruit for the long term. We are recruiting to build the leadership pipeline for the organization.”
V. Krishnan, executive vice-president, corporate HR at packaged consumer goods firm Dabur India Ltd, said the company had added around 2,000 people till date in this fiscal to continue with its strategy of rural expansion, which it embarked upon two years back.
“Overall, the FMCG sector is growing at 15-16% year-on-year. This sector services the daily needs of households, which aren’t expenses one can cut down,” Krishnan said. “Moreover, a significant portion of growth is coming from the rural sector, where there has been an improvement in purchasing power due to government schemes like MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme).”
That the hiring sentiment hasn’t been impacted much is also evident from the summer placement record of India’s leading business schools. Summer placements are usually a good indicator of how final placement at campuses will look like.
Top institutions such as the Indian Institutes of Management (IIM) in Ahmedabad, Bangalore, Kolkata, and Lucknow, and the XLRI School of Business and Human Resources in Jamshedpur saw their students land summer internships within two-five days of the start of placements, on stipends ranging from Rs.50,000 to Rs.1 lakh a month.
Companies are not only hiring new people, but are also raising salaries of existing employees. HR consulting and outsourcing firm Aon Hewitt expects salaries in India to grow by 10.5-11% in fiscal 2013. Though this is a few percentage points less than the growth in salaries in 2011-12, it is still “comparatively higher than other Asian markets”, said Anandorup Ghose, executive compensation and governance practice leader at Aon Hewitt in India.
Salary growth this fiscal has been marginally dragged down by the services sector, where employee cost is a substantial portion of operating expenditure, and therefore highly co-related with a swing in operational performance, Ghose said.
Sudarshan of EMA Partners said a shortage of relevant skill sets at a time when Indian companies are increasingly turning global in reach is one of the factors still driving wage growth. “If there is a candidate out there with five years of proven experience in his domain, he will definitely change jobs at a premium,” he said.
Yet, the demand-supply situation has improved greatly, Ghose said. On the one hand, business schools and engineering colleges have been churning out graduates, and on the other, several senior executives with experience of managing large businesses are always in the job market.
“To some extent, the increase in salaries despite a slowdown can be attributed to a strong sense of competition for a select talent set and peer pressure among companies to be seen as good paymasters,” Ghose said.