Boom In Jobs: Corporate India goes on a hiring spree, IT sector leads the way
- Job creation pace rises to 8.5% after losses seen during the pandemic.
- According to Jefferies, in FY22 total employee costs were up 13% YoY, the fastest hike in nine years.
- No boom in unorganised sector jobs or wages yet, but could pick up by the end of the calendar year.
AdvertisementAfter retrenching employees en masse after the onset of the pandemic, Corporate India has created more jobs than it cut in FY21. A study of 760 listed companies done by global investment bank Jefferies shows that the job creation pace of 8.5% year-on-year has more than compensated for the losses the industry saw in FY21. This boom in white collar jobs augurs well for urban consumption plays like hotels, auto companies and food tech players like Zomato.
No prizes for guessing that maximum new jobs have been created by the IT sector – with the sector’s employee count going up by 22%, contributing 61% to the incremental jobs in the organised sector.
A note by Jefferies says, “Notably, the government-owned companies (PSUs) continued to shed jobs, with headcount down 1.5% YoY. Indeed, private sector hiring was a strong 11.3% and now contributes ~80% to the total listed space employee count.”
The study of 760 listed companies accounts for 6 million employees.
Sectoral job creation in FY22
|No of jobs created in FY22
With attrition rates going up, companies are also giving liberal wage hikes to retain employees. The average attrition in the IT sector has been trending above 20%. The era of double-digit salary hikes are back after years of salary cuts. According to its research, Jefferies has found that FY22 total employee costs were up 13% year-on-year (YoY), the fastest hike in nine years. The large new hiring (mostly entry level) kept the rise in average cost per employee (4.2% YoY) at a 10-year low. For the IT sector, average costs per employee declined by 1.9% YoY due to the 'pyramid' effect, which basically means that the companies start hiring more freshers to bring wage costs.
The report also found that the average pay increase in PSUs was 7.5% compared to the hikes given by the listed companies on an average. This is reflective of an ageing workforce at the PSUs.
On Monday, global firm Aon released a report on salary projections for 2023. Its survey shows that salaries in India are expected to increase by 10.4% in 2023, compared to an actual increase of 10.6% to date in 2022, which is slightly higher than the 9.9% increase projected in February.
The global professional services firm said that attrition rate for the first half of 2022 continued to be high at 20.3%, only marginally lower than the 21% recorded in 2021, thus retaining the pressure on salaries. This trend is expected to continue for the next few months.
“Adjusting for the employee entry/exit, which distort the 'average cost' changes, we estimate that the annual pay hike was an effective 12.5% YoY (i.e., above inflation) in FY22, an 8-year high. The implied FY20-22 pay hike CAGR was 10.3%, broadly in line with the Tr-5-Y CAGR run rate of 10.9%. Pay hikes should stay above average in FY23, given inflation and as FY22 corporate profit rise reflects with a lag,” said Jefferies.
AdvertisementBut as is the case with corporate India, compensation paid to directors rose by 37%, shows data from 120 companies. This is 3 times the salary hike given to employees by the same companies.
Unskilled workers have not had the same boom in wages, as there’s no construction boom yet and automation has also resulted in cost savings for large EPC players like Larsen & Toubro. Construction workforce employed by the engineering and procurement companies (EPC) tend to give a good sense of the state of informal sector jobs. According to Jefferies, the number of workers at L&T declined 14% YoY to 275,000 and is 33% below the FY15 peak, partly on housing construction slowdown (revival from FY23) and partly on automation.
Rural wage growth is also trending weak at around 4% YoY, as per government’s data. Some recovery is expected towards the end of the year for lower- skilled jobs.
Data suggests that annual growth in the labour force at 10-12 million on a base of 500 million is not bad from a demographics point of view as most of the jobs are created outside agriculture.
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