While the net profit of 100 companies went up by 18 per cent across different sectors, their manpower expenses rose at a greater pace of 22 per cent, the Assocham Eco Pulse analysis of the second quarter performance of companies has indicated.
The 20 per cent growth in total income of these firms was also lower than the increase in staff expenses.
''Investment in human resources through salary hikes and increasing head count have made companies incur more expenditure on the employees,'' Assocham president Anil K Agarwal said while releasing the study.
The IT and the ITeS sector had to bear the maximum rise in staff expenses, which went up by 36 per cent against the bottomline growth of 29 per cent, and topline rise of 30.5 per cent in the Q2 results.
The reasons are not far to seek since most of the leading IT and ITES have added to the strength of their staff, which is also asking for more salaries.
However, the pharmaceutical sector has registered the lowest growth in staff cost of 13 per cent along with a negative growth in net profit.
But the sector, which stands out in terms of controlling the employment cost, is the automobile sector, which has posted a staff cost growth of 15 per cent despite having a profit growth of 31 per cent.
Financial services and banks also came under the pressure of bearing the increase in the cost of manpower, which in their case went up 22.4 per cent.
This is despite the fact the financial services faced a lot of pressure on their net profitability which dropped by 2 per cent for a sample of firms whose quarterly results were analysed by the AEP.
The pharma companies also followed a similar trend and despite registering a negative growth of 30 per cent, bore the brunt of additional staff cost of 13 per cent.
Research and development form the core business activity of this sector and recruitment of skilled manpower is a necessity. Therefore, staff cost is increasing consistently in this sector.
The only exception is the automobile sector where the percentage of staff cost growth in Q2, 2005 over Q2, 2004, has been lesser than the growth in the net profit.
This furiously expanding sector posted a 31 per cent growth in net profits whereas the staff cost increased by just 15 per cent.
Thus, the growth in bottomline has been two fold of the growth in the cost of employing staff, the chamber said in its analysis.
