Pay panel keeps LG, Samsung in bonus mode

Just before Diwali early this month, Samsung handed its employees the customary bonus as well as gifts. Top performers received a double bonus. The 4,000 men and women on the company’s rolls can now be found talking excitedly about the annual increment they expect in March next year.

LG Electronics India gave its 3,800 employees a 240 per cent bonus last month for the festival season. This month, it is learnt, a 200 per cent bonus is in the works. Ample reward for growing the company’s business over 50 per cent in September and October!

The Rs 32,000-crore consumer electronics industry stands out as the shining exception. Business is booming, companies have lined up huge investments and hiring in large numbers is taking place. Samsung, for instance, has plans to bring on board no less than 950 people and LG has lined up Rs 250-crore R&D investment in 2009.
 

SLOWDOWN?
Category	Y-o-Y growth for Jan-Sept ‘08 (in %)

CTVs29.6 LCDs156.6 Refrigerators9.9 Washing machines10.4 Microwaves25.0 Airconditioners16.4 Source: ORG

Indeed, where other industries complained of poor demand, festival season sales for consumer electronics grew 30-35 per cent year on year, boosting average growth for the year from 7-8 per cent to 10 per cent. In fact, it was the durable sector which drove industrial growth of 4.8 per cent in September.

Most of this new demand was the result of Pay Commission largesse that reached an estimated 4 million government employees. “The postponement of purchase during the summer, coupled with the first instalment of Pay Commission arrears boosted demand during the festive season,” said Godrej Appliances Vice-President (sales & marketing) Kamal Nandi.

ACCORDING to Samsung Deputy Managing Director Ravinder Zutshi, there is evidence that consumers have pulled investments out of the stock market and real estate and put that money into consumer electronics, except in Gujarat.

Looking forward, things could only get better for the industry. The Cabinet has approved an average 67 per cent rise in the salaries of 1.6 million public sector employees. At least one state-owned company, Oil and Natural Gas Corporation, has set aside Rs 320 crore for its employees to buy consumer durables. The award for the armed forces is also expected soon. And government employees will receive the second lot of pay arrears by April.

“On the demand side, the cricket calendar is full for the next four months,” said Zutshi. “It is great time to sell LCDs and plasmas and, of late, home theatre systems as well.”Added Philips Chief Marketing Officer Vivek Sharma: “The government is taking fiscal measures that will boost domestic consumption.” The bonuses and increments are only to be expected.