Major PSUs able to reduce staff cost

Some major public sector undertakings (PSUs) have been able to substantially reduce their employee costs. According to data compiled by BS Research Bureau for BSE 100 companies, seven public sector companies — Indian Oil Corporation (IOCL), Bank of India, Union Bank, Bharat Petroleum (BPCL), Oil and Natural Gas Corporation (ONGC), Hindustan Petroleum (HPCL) and GAIL — have reduced their employee costs ranging from one per cent to 21 per cent.

IOC led with a 21 per cent decline in employee costs in financial year 2011-12 compared to 2010-11. Hindustan Petroleum followed with a 19 per cent reduction in staff costs. ONGC reduced manpower costs marginally (one per cent) compared to the previous year.

The voluntary retirement scheme (VRS) availed by employees is the primary reason for the companies to show a drop in employee costs, say experts. D K Joshi, chief economist at CRISIL, said, “It is surprising to note that employee costs are down at a time when inflation has gone up and PSUs are not firing people. The only reason that the costs have come down could be that a lot of people retired during financial year 2011-12. The companies did not hire people to fill these posts and, hence, the costs have come down.”

Joshi added this would not lead to any change in the unemployment rates.

Human resource experts and consultants said PSUs offered VRS to highly-paid employees so that they can cut costs on this front. They are not hiring new people for these posts currently. So, they have saved on huge costs through this method. This is definitely the most recommended strategy at a time when the fears of a slowdown loom large, they said.

Sunil Goel, director of executive search firm GlobalHunt explained that apart from VRS, the other reason was that public sector companies, including banks, had recently integrated their business units. This would mean having lesser people on board. According to him, this year’s outlook for spending on staff would be similar to the previous year, with a constant focus on cost reduction through VRS and other options.

Other consultants believe that hiring people on a short-term/contractual basis could be another reason for a drop in staff costs. “Since there is an urgency to get more people, PSU firms are hiring people on contracts and not as permanent staff. This is essentially to cut staff costs,” said Neeti Sharma, vice-president at Team Lease Services.