New Delhi: The wage bill of the service sector witnessed a staggering average increase of 121% on yearly basis and a last quarter rise of 102%, according to ‘Eco Pulse’,an analysis done by Assocham.
Employers in the manufacturing sector had to shell out an average of 24% more in the form of pay cheques for the financial year ended March 2007. The quarterly review indicated that the sector spent 43% more in the fourth quarter of 2006-07.
As per analysis of financial results of 75 companies, overall average hike in the staff cost of both services and manufacturing companies was an enormous 76% on year-on-year basis and 70% on quarterly basis.
Companies whose employee cost shot up included Indiabulls, UTI Bank, TCS, Infosys, Biocon and Satyam Computer Services among others, whose yearly staff bill increased by about 193%, 59%, 55%, 48%, 47% and 45% respectively.
“The wage cost has shot up on account of higher salaries as also due to an increased headcount”, says Mr. Venugopal N Dhoot, President, Assocham.
Expenditure on personnel as a percentage of total income fell in the financial year 2006-07 to an average of 18.13%, from 18.87% in the past fiscal. However, it rose to 15.51% in the fourth quarter of 2006-07 from around 13% in Q4 of 2005-06. Both services and manufacturing firms have followed the trend.
Personnel cost and revenues of the service sector expanded at a fast pace touching average growth rates of 121% and 125% respectively. Owing to an equally aggressive expansion of both components, personnel cost as a percentage of total revenues did not register any major change. It stayed at 28.32% in 2006-07, marginally lower than the previous year’s 28.95%.
Also, ratio escalated to an average of 28.33% in Q4 of 2006-07 in case of companies engaged in services, from about 22.85% in the fourth quarter of 2005-06. Service sector increased its wage spend much more rapidly than the total income in the Jan-Mar 2007, with average growth rates being close to 102% and 28 %.
In manufacturing companies, staff cost as a percentage of total income fell from an average of 6.1% in 2005-06 to 5.24% in 2006-07. Total income of firms in manufacturing registered an average growth of almost 47% in the financial year 2007 and wage cost on the other hand increased by a little less than 24 %.
Manufacturing companies did not see a significant variation in the ratio on quarter-on-quarter basis. It was 5.44% in Jan-Mar 2007 vis-à-vis 5.22% in the corresponding quarter of 2005-06. Revenues of the sector were up by 30% and wage cost by about 43% over the same period.
Total revenues of these 75 companies grew by 90% in the entire fiscal year 2006-07 and the bottom line also posted an impressive growth rate of close to 82.5%. Net profit rose by an average of almost 62% in the quarter ending March 2007 over Jan-Mar 2006 and total income on the other hand was up by an average of 29%.
16% of the companies recorded a negative growth in their personnel cost in the last quarter as compared to the previous year. Average drop recorded was about 15% on quarterly basis. Number of companies observing negative growth rate was equally shared by the two sectors. While average fall in the service sector was about 21%, manufacturing companies posted a negative growth rate of nearly 9%.