In 2023 India, home to a renowned startup ecosystem, witnessed a noteworthy deceleration in the rate of salary increments for startup employees. The fiscal year brought about a significant shift, with average pay hikes ranging between 7% and 12%—a substantial decline from the previous fiscal period, as indicated by various reports surfing the net.
In 2023 India, home to a renowned startup ecosystem, witnessed a noteworthy deceleration in the rate of salary increments for startup employees. The fiscal year brought about a significant shift, with average pay hikes ranging between 7% and 12%—a substantial decline from the previous fiscal period, as indicated by various reports surfing the net.
With more than 100 Indian startup unicorns have taken steps to trim expenses, opting to curtail their budget for annual appraisals. Approximately 30% of these unicorns have set aside minimal to no resources for employee salary increments during this period. Over 100 unicorns have undertaken these cost-cutting measures to maintain financial stability. It would be accurate to state that the era of substantial salary increases is now in the past. This significant decline is having a noticeable impact throughout the business landscape.
In some states like Chennai, employees received almost half of their salary increments not exceeding 12% maxed out. Whereas the preceding year, 2021-22, was an anomaly in startup investments and the job market. However, the subsequent year, 2022-23, witnessed a metamorphosis in how Indian new-age enterprises approached their workforce’s financial aspects.
While this transition prompted widespread inflation-oriented adjustments, there were intriguing nuances within the startup arena. Particular niche and smaller startups, often characterized by tech teams of less than 40 individuals, took a distinctive route.
They opted to bolster the compensation of their entry and mid-level technology roles by embracing increments spanning the generous range of 15% to 20%. The objective was twofold: attract fresh talent and secure the retention of specialized staff members crucial for their unique operations.
Yet, amidst these changes, a noteworthy trend emerged. Approximately a quarter to a third of companies decided to defer salary increments for short periods, ranging from one to two quarters. Within this scenario, a select subset of functions was privileged with specific pay adjustments, reinforcing a strategic and targeted approach to workforce management.
A seismic realignment in compensation strategies reverberated within the leadership ranks of startups. High-ranking executives encountered a substantial correction in their compensation structures. The once-familiar influx of cash increments, often vital for personal financial stability, encountered a tangible reduction. This strategic shift was propelled by the pressing concerns of managing cash flows, a perpetual challenge for startups navigating the competitive landscape.
The recalibration of compensation models extended to equity-based remuneration as well. A growing spotlight on equity compensation underscored the evolving landscape of startup incentives.
However, this equity-oriented approach was not without its complexities. A palpable cultural shift was observed in how Employee Stock Ownership Plans (ESOPs) were perceived across different echelons of startups. While there was a palpable embrace of ESOPs at the leadership tier, this sentiment was not universally shared among entry-level roles. This incongruence was fueled by a limited awareness of stock options and a shorter average tenure of approximately two years at the entry-level. Consequently, the allure of ESOPs, often vesting after four years, was more subdued for these nascent career stages.
By thoroughly examining information extracted from a range of reports encompassing over 200 startups and 1,000 candidates, it can be affirmed that this analysis encapsulates the complex interplay between startup compensation and the ever-changing dynamics of contemporary work.
From salary increments to equity allocation, the startup landscape is a canvas of constant evolution, navigating the delicate balance between financial sustainability and talent retention.”
