Startups: At 8-12%, pay hikes at startups halve

CHENNAI: Employees at startups received average salary increments between 8-12% for fiscal year 2022-23 – almost half of what teams at these new-age tech enterprises saw in the previous year, a report showed.

While 2021-22 was an outlier year in terms of investments and job market in the startup world, 2022-23 has seen Indian new-age companies restructure employee costs by offering inflation-led salary increments in the face of macro challenges, a report by VC firm Elevation Capital showed.
However, when it comes to increments, there are also cases of niche and small startups (with technology teams of less than 40 people) that have offered salary increments for entry and mid-level tech roles in the range of 15-20% to retain certain specialised staff. Nearly 30% of companies also deferred salary increments for one or two quarters with a few functions alone receiving specific raises, the report adds. A marked compensation correction and restructuring happened in startup leadership roles as top executives saw cash increments being replaced with stock components as startups battle cash flow issues.

The prominence of equity compensation in the startup ecosystem has been growing due to increasing liquidity events, Kallan H, VP of talent, Elevation Capital, said. “We are observing a cultural shift in how ESOPs are viewed by employees and startups; while there is a higher buy-in for ESOPs at the leadership level, awareness of stock options is still a bit low in the entry levels,” he said. “Given that career tenures at entry levels are an average of two years, there is less appetite for ESOPs which generally vest after four years,” he added. The report analysed data from over 200 startups and 1,000 candidates.