Brokers to be stingy in giving raises, bonuses

Likely to give bonuses of up to 50 per cent of the annual cost to company, while the raise in salary may be 10-25 per cent.

With profitability under pressure, domestic brokerages are likely to keep their purse strings tight while giving raises and bonuses to their employees this financial year.

Some of the leading broking firms have started annual appraisals of their staff and are expected to decide the quantum of rise and bonus by the end of April.

On an average, brokerages are likely to give bonuses of up to 50 per cent of the annual cost to company (CTC) to their staff for 2010-11, while hikes could be 10-25 per cent, according to industry officials and analysts.

This will be a far cry from the heady days of the previous bull-run period, which started from mid-2005 and lasted till January 2008. For example, in the financial year 2006-07, many domestic brokerages gave bonuses of 80-120 per cent and hikes of 50-100 per cent to their staff.

“Unless the growth comes back, you can’t expect brokerages to give good bonuses and rise to their staff,” said Anil Bhattar, an industry expert. “At the same time, retaining quality people is also important, as there is competition from new players. So, you need to give some incentives,” he added.

Despite an increase in the overall turnover, the shift from the more lucrative cash segment, where retail investors are major participants, to the options segment has hurt the profitability of brokerages.

The share of cash segment to the overall turnover was 28.02 per cent in 2006-07, which has come down to 13.85 per cent in 2010-11, according to the data provided by the BS Research Bureau. In comparison, share of options segment to the overall turnover has increased to 57.05 per cent in 2010-11 from just 9.57 per cent in 2006-07, the data showed.

“The brokerage industry is in a consolidation phase. The yields have come down due to tough competition,” said head of a retail broking firm, who wished not to be named. “In such a scenario, unless there is visibility of growth, there would be average hikes and bonuses for the employees,” he added.

The brokerage in the cash segment varies from 15-45 paisa per Rs 100 turnover. In the options segment, the brokerage ranges from Rs 50-100 per contract lot for the retail investors and Rs 10-15 per contract lot for the institutional investors.

Assuming 0.15 per cent brokerage for cash market, if an investor buys Reliance Industries Ltd (RIL) shares worth Rs 2.5 lakh, his brokerage would be about Rs 375. On the other hand, if he buys one lot of RIL call option worth Rs 2.5 lakh, his brokerage would be maximum Rs 100.