India Inc's profits leap, wages limp

Net profit of 630 mfg firms zoom 50%, salaries inch up 8% in FY05.

Companies may have clocked a high net profit growth in the last two years, but they certainly have been less than liberal when it comes to wages and salaries.

A Business Standard Research Bureau study of 630 manufacturing companies shows that while in each of the two last years, these companies posted a net profit growth of 50 per cent, their employee cost has gone up by a little over eight per cent.

During the year ended March 31, 2005, the salaries and wages paid by the 630 manufacturing companies increased by 8.46 per cent while their net profit increased by 49.3 per cent. In 2004, the salaries of these 630 companies increased by 8.03 per cent even as net profits surged by 49.6 per cent.

Reliance Industries, whose employee cost went up by over 27 per cent in 2004-2005, skewed the overall growth rate in wages and salaries for the 630 companies for the year ended March 2005. Excluding Reliance, the growth rate in salaries and wages of 629 companies actually declined to 7.7 per cent in the year ending in March 2005, down from 8.3 per cent in in the year ending in March 2004.

What is more, wage and salary increments have not only not been kept pace with the growth in profits but also with the rise in sales revenue. While the sales of 650 companies increased by 22.26 per cent in the year ended in 2004-2005, wages and salaries as a percentage of sales moved down ""  probably the first time in corporate history "" to below 5 per cent (4.87 per cent). In the years ending in March 2004 and 2003, the wages and salaries paid by these companies accounted for 5.5 per cent of sales.

The study further reveals that companies with net sales below Rs 100 crore increased their salaries by nearly 3 per cent in 2004-2005 versus a nominal decline in the growth of salaries in 2003-2004.

The salary growth rate for companies with sales of over Rs 100 crore was 8.75 per cent in 2004-2005 and 8.50 per cent in 2003-2004. As against this, the net profit of companies with sales of over Rs 100 crore increased by 46.6 per cent in 2004-2005 and by 44 per cent in 2003-2004.

While manufacturing companies have not been paying their employees well, that's not the case with software companies. The wage and salary cost of 60 information technologies companies studied increased by 36 per cent in 2004-2005 and by 34.4 per cent in 2003-2004.