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Staff liabilities rise for BSE 100 firms

Staff liabilities rise for BSE 100 firms

New Delhi: Unfunded employee benefit liabilities, that include leave and other incentives that companies have not set aside funds for, more than doubled in a year to 58,000 crore among BSE 100 companies as of 31 March 2011, according to a survey by consulting firm Towers Watson.

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“The employee benefits liabilities would continue to increase as companies grow, and this becomes all the more important if the economic environment is uncertain," said Kulin Patel, director of client account management at Towers Watson India.

The increase in liabilities has a direct impact on profitability, as accounting standards require immediate recognition of a change in liability measurements, the report said.

“This may not impact the current management, but in the future, at some point of time, these liabilities need to be discharged; somebody will have to pay for it," said E. Balaji, director and president, Ma Foi Randstad. “If they have huge unfunded benefit liabilities, it could spell trouble for them."

State-controlled banks face the biggest risk from the increase in liabilities, the report said. For banks, the main reason for the increase is the adoption of new wage agreements with employees. Other reasons that have contributed to the increase in liabilities are greater short-term salary increases compared with the long-term assumed rate for the liability calculation and improved disclosures.

The combined liabilities for the banks in the BSE 100 almost doubled to 10,500 crore from 6,154 crore a year earlier. Oil and gas companies within the BSE 100 were the second largest group, with average benefit liabilities at 1,884 crore compared with 1,680 crore a year earlier.

Average sectoral liabilities, including IT (Rs 514 crore), telecom (Rs 411 crore), power (Rs 262 crore) and mining (Rs 232 crore), have not changed much over the past three years.


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