Profits nearly quadrupled but salaries of employees didn’t: Economic Survey Urges Firms to Raise Compensation
Profits nearly quadrupled but salaries of employees didn't: Economic Survey Urges Firms to Raise Compensation
Economic Survey highlights the disparity between soaring corporate profits and stagnant employee compensation, urging businesses to address the imbalance.
The Indian corporate sector has enjoyed substantial financial growth in recent years, yet this success has not been mirrored in job creation or employee salary increases, according to the Economic Survey for 2023-24. The survey emphasizes the need for companies to enhance hiring and increase worker compensation to align with their financial achievements.
Corporate Profits vs. Employee Compensation
The Economic Survey reveals that over 33,000 companies have seen their profits before taxes nearly quadruple from FY20 to FY23. Despite this financial surge, there has been a significant lag in hiring and compensation growth. The survey highlights the importance of aligning employee compensation with the sector’s financial performance, suggesting that boosting hiring and worker pay is in the best interest of companies.
Economic Growth and Job Creation
The survey points out that many factors influencing economic growth, job creation, and productivity are under the control of state governments. It calls for a cooperative effort between the Centre, states and the private sector to meet the aspirations of Indians and achieve the goal of Viksit Bharat by 2047.
Impact of Economic Shocks
Economic shocks, such as bad debts and the Covid-19 pandemic, have greatly influenced the country’s employment landscape. The Annual Survey of Unincorporated Enterprises for 2022-23 indicates a decrease in overall employment in these enterprises from 11.1 crore in 2015-16 to 10.96 crore. While the manufacturing sector lost 54 lakh workers, job growth in trade and services sectors limited the overall job loss to around 16.45 lakh.
CEO-to-Median Employee Pay Ratio
The gap between the pay of chief executive officers and median employees in India’s leading companies has widened since the pre-pandemic period. A study of 35 top-listed companies by sector or market capitalization shows an increase in the CEO-to-median employee pay ratio in 2023-24 compared to 2019-20.
Companies like Hindustan Unilever, Indian Hotels Co, EIH Ltd, Infosys, Larsen & Toubro, Sun Pharma, Titan, Tata Steel, JSW Steel, Wipro, Dr. Reddy’s Laboratories, Dabur, Voltas, and Mphasis have reported an increase in this ratio. Most companies have seen a 20-60% increase, with a few, including ITC, Bajaj Electricals, Mahindra & Mahindra, and Whirlpool India, experiencing a near doubling of the gap.
The Economic Survey’s findings underscore the urgent need for Indian businesses to reassess their compensation strategies and ensure that employees benefit from the sector’s financial growth.
