Mumbai: A number of listed firms are spending more than twice what they used to on employees two years ago. The revival in the economy and the resumption of hiring activity in many sectors have had a twin-fold effect on their wage bills.

While these firms are hiring more people, they are also paying employees more than what they did a couple of years ago.

Also See | Employee costs (Graphic)

A Mint analysis of expenditure on employee compensation by BSE 500 companies shows that at least 390 firms saw wage bills go up over March 2008 levels.

Among these, at least 75 companies saw their staff costs increase by 100% or more.

At least 114 companies saw their staff costs go up 50-100%.

The total staff costs of BSE 500 companies have gone up from Rs36,000 crore in the quarter ended March 2008 to Rs51,000 crore in the three-month period ended June 2010, a rise of 41%.

People employed in the pharma, infrastructure and financial services sectors are among the key beneficiaries.

Analysts say the spiralling of employee compensation is a result of new hires that happened over the past few quarters as well as an increase in salaries. Wages had gone into a freeze following the collapse of US investment bank Lehman Brothers HoldingsInc. in September 2008 as many companies reduced workers and cut costs. For the next four quarters employee costs of BSE 500 companies either dipped or remained stagnant.

This trend began to reverse in the quarter ended December 2009. Since then, wages have seen a sharp jump in the last three quarters. Increases are likely to remain healthy, analysts at Edelweiss Capital Ltd said in a strategy report released earlier this week. “These higher compensation payouts are likely to drive urban consumption," the report said.

Sarabjit Kour Nangra, vice- president, research, Angel Broking Ltd, said employee costs are bound to go up considerably this year. “Wages have risen at the rate of 20% year-on-year. This year, the rise could be sharper as the last two years have not been that good. Salary hikes will continue as the economy picks up."

A Mercer Consulting survey of the top 200 companies shows 80% of them are hiring. The Mercer India Monitor report is yet to be released.

“In the past five years, salaries have increased at a CAGR (compound annual growth rate) of 20-25%," said Shamita Chatterjee, head, information, products and solutions. “In 2009-10, the salary increase was at an average of 9% in India. In 2010-11, so far, the hike has been 11.5% on average, and we expect this to go beyond 12% in 2011."

This number is expected to rise as the job market heats up in high-growth sectors such as infrastructure, information technology and banking and financial services, say analysts.

For the 30 companies that comprise the benchmark Sensitive Index (Sensex), employee costs have gone up from Rs13,847 crore to Rs19,324 crore, a rise of nearly 40% between March 2008 and June 2010.

Among the Sensex firms, Jaiprakash Associates Ltd saw the maximum increase in staff costs (114%) followed by State Bank of India (95%) and HDFC Bank Ltd (93%).

Even among the smaller firms, banks and infrastructure companies led the way. Axis Bank Ltd, IndusInd Bank Ltd, Corporation Bank and Syndicate Bank are among the firms that have seen staff costs double.

“With 12.4%, pharmaceutical sector leads the pack in terms of percentage increase in compensation this year, and this may go up to 13% next year," according to the Mercer survey. “Pharma, auto and manufacturing companies lead the race in terms of hiring and salary hikes this year."

Kris Lakshmikanth, chief executive officer and managing director, The Head Hunters India Pvt. Ltd, said leading infrastructure firms are also on a hiring spree. “The infrastructure sector is very hot with high salaries being offered even at entry levels." “Listed companies in this sector are offering Rs2-2.4 lakh for freshers," he said. Housing Development and Infrastructure Ltd, Lanco Infratech Ltd and Prism Cement Ltd are the infrastructure firms that have seen staff costs rise by 100% or more in the past two years.

At the middle- and senior levels, where the numbers are fewer, it is a different story. “There is huge churn, which is forcing companies to offer higher compensation to ensure retention. The salaries offered at the mid-level in India range from Rs15 lakh to Rs40 lakh a year," said Chatterjee of Mercer.

According to Lakshmikanth, at these higher levels, it’s the season of high joining bonuses, which are running into crores. “Recently, a company in the infrastructure sector paid a joining bonus of Rs1.75 crore for a top-level hire," Lakshmikanth said.

Some leading companies are also offering to underwrite education expenses of employees and their wards abroad as an additional incentive.

In the information technology sector, despite the protectionist noises made in the US, more jobs are being created in India, resulting in higher demand for experienced hands and handsome pay rises.

Graphic by Ahmed Raza Khan/Mint