India Inc's combined salary and wage growth slows amid muted demand

The sample includes 25 companies that are part of the Nifty50 benchmark index or 26 if we include Bajaj Finance, a subsidiary of Bajaj Finserv which is also an index company

With a revenue growth slowdown hurting their margins and earnings, Indian companies seem to be seeking to rationalise their employee costs. The combined salary & wage expenses of the country’s listed companies grew just 4.8 per cent in the January-March quarter of 2025 (Q4FY25) over a year earlier — in single digits for a fifth straight quarter, and the slowest rate in at least 17 quarters. 

 For comparison, these companies’ combined salary & wage expenses had increased 6.1 per cent year-on-year in the same quarter of FY24 and 5.1 per cent in Q3FY25.

  The 457 listed companies in our sample which have declared their results for Q4FY25 together spent around ₹2.46 trillion on their employees in the quarter, up from ₹2.45 trillion in Q4FY24 and ₹2.38 trillion in Q3FY25.

  Our sample has 25 companies that are part of the benchmark Nifty50 index (26 if we include Bajaj Finance, a subsidiary of Bajaj Finserv, which is also an index company). The combined market capitalisation of the companies in this sample had a combined market capitalisation (mcap) of around ₹199.5 trillion on Wednesday — 47 per cent of the combined mcap of all BSE-listed companies that day.

  The share of salary & wage expenses in Indian companies’ net sales declined to 12 per cent in Q4FY25 — against 12.14 per cent last year, and a five-year average of 12.6 per cent.

  According to analysts, the slowdown in compensation growth is on expected lines and is also reflected in the slowdown seen in urban consumption and discretionary spends on items like automobile. “The K-shaped recovery in growth and hiring was selective and led by the information technology (IT) services and banking, financial services and insurance (BFSI) sectors.  The IT sector slammed the brakes in hiring around two years ago, and now banks and lenders are also cutting costs as they struggle with a slowdown in credit growth, margin pressure and rise in delinquencies,” said Dhananjay Sinha, head research and equity strategy, Systematix Institutional Equity.

  The combined net sales (gross interest income in case of lenders) of the 457 companies in our sample was up 6.4 per cent Y-o-Y in Q4FY25 — the slowest growth rate in six quarters. Their revenue is now set to grow at a single-digit rate for an eighth consecutive quarter —since the quarter ended June 2023.

These companies’ combined net profit (adjusted for exceptional gains & losses) were up 6.7 per cent Y-o-Y at around ₹2.24 trillion in Q4FY25 — a decline from 7.1 per cent in Q3FY25, but an improvement from 6.4 per cent in Q4FY24.

 

While a slowdown in India Inc’s salary & wage expenses was led in the past by IT services companies like Tata Consultancy Services, Infosys and Wipro, the current round of rationalisation is led by BFSI, which has faced a slowdown in growth and margin pressures in recent quarters.

 

Companies in the IT services and BFSI sectors are the biggest employers in the listed space, accounting for 48 per cent and around 30 per cent of the salary & wage expenses of all companies in our sample.

 

The BFSI sector’s salary & wage expenses were up 3.7 per cent Y-o-Y in Q4FY25 — down from 7.2 per cent in Q4FY24 and 4.1 per cent in Q3FY25, and the slowest pace in at least 17 quarters.

 

There had been a strong wave of fresh hiring in the BFSI space in FY23 and FY24, leading to strong double-digit growth in employee expenses of these companies for seven consecutive quarters starting July-September 2022.

 

IT services companies, on the other hand, reported an uptick in hiring and salary hikes, with their combined salary & wage expenses growing 6.2 per cent Y-o-Y in Q4FY25 — the fastest pace in six quarters. The current growth in salary & wage expenses in the IT Sector is, however, a third of the average 20.7 per cent Y-o-Y growth reported by the sector in the nine quarters starting June 2021.

 

Among other key sectors in our sample, the salary & wage expenses were up 3.8 per cent Y-o-Y in Q4FY25 for fast-moving consumer goods (FMCG) companies, and 4.6 per cent for the oil & gas sector. Mining & metal companies like Vedanta and Jindal Steel reported an 8.9 per cent Y-o-Y decline in employee expenses in the quarter.