Maruti employee costs remain lowest among car makers

Despite the bumper increments Maruti Suzuki India Ltd offered its employees at the Gurgaon and Manesar facilities in Haryana, the company's wage bill is expected to remain the lowest among listed automobile companies.

According to estimates available with industry experts, the wage bill of Maruti Suzuki, the country's largest car maker, is expected to increase by Rs 65-70 crore (Rs 650-700 million) after the increments.

"Even if the same benefits are extended to workers at Manesar, the wage hike will have a marginal impact of around 30 basis points on the company's margins.

Employee costs as a proportion of net sales may go up to 2.7 per cent from the current 2.4 per cent," said Yaresh Kothari, auto analyst at brokerage firm Angel Broking.

Maruti Suzuki reported employee benefits of Rs 843.8 crore in the last financial year amounting to 2.4 per cent of the company's net sales.

The employee costs at the company are much lower than the Rs 1,071.8 crore (Rs 10.71 billion) recorded by Mahindra and Mahindra Ltd (5.4 per cent of revenue) and Rs 2,691.45 crore (Rs 26.91 billion) by Tata Motors Ltd (five per cent) last financial year.

In a pact inked with the Gurgaon-based Maruti Udyog Kamgar Union, Maruti Suzuki increased gross salary by Rs 14,800 per month spread over a period of three years for permanent workers in the company.

While 75 per cent of the gross salary increment will be given in the first year, the company will give 12.5 per cent each in the second and third years.

"The same agreement will be extended to the workers at the Manesar unit. Every worker at Manesar unit will have to sign the agreement, which will be approved on two-thirds majority," said S Y Siddiqui, chief operating officer (admin, human resources) at Maruti Suzuki.

"We are working out increments for technicians as well.

"The wage bill will be as per our labour cost plan. We usually spend 2.4-2.5 per cent of our sales on wages and there will be little increase."

Maruti Suzuki has 2,032 permanent workers at its Gurgaon unit and 986 permanent workers at the Manesar facility.

The gross salary of an entry-level worker in the company is Rs 23,500 at present.

In the new wage structure, the average entry-level salary will increase to Rs 37,800 over the next three years. For an experienced worker at Gurgaon and Manesar, the increased salary will stand at Rs 51,800 and Rs 39,800, respectively.

The revision is considered to be very healthy, given that the company had given an increment of Rs 9,300 when wages were revised last in 2009.

Besides the increment in gross salary, the company will give an additional Rs 1,000 in an ad hoc payment to workers, travel allowance of Rs 1,200 every month and double insurance coverage to Rs 5,500.

The dearness allowance has been made variable to consider any inflationary pressure in society.

The increments and concessions doled out come against the backdrop of the repeated labour strikes witnessed at Maruti Suzuki's Manesar unit.

The company has lost production of over 110,000 vehicles and revenue to the tune of Rs 4,000 crore (Rs 40 billion) in four instances of labour trouble since June last year.