Majority startups pay packets higher then market median: Study

Written by PTI | New Delhi | Updated: Jun 11 2014, 23:28pm hrs
Pay packetsAs many as 82 per cent of the start-ups surveyed pay more than the market median. Reuters
Many Indian start-ups are doling out handsome pay packets, with junior level employees getting not less than Rs 5 lakh a year besides providing flexible work timings as they look to attract talent, says a study.

It also said 'interesting work' and 'opportunity to grow' are also prevalent among start-ups that help bring in talent.

The findings are a part of a joint study conducted by global management consultancy Hay Group and global venture capital firm Canaan Partners across four technology-related sectors.

As many as 82 per cent of the start-ups surveyed pay more than the market median, the study said.

While junior level people get paid Rs 5.50 lakh per annum, those at the mid-level and senior-level get paid Rs 15 lakh and Rs 35 lakh a year, respectively, which is at par or above the more traditional and mature organisations.

"The pay philosophy when coupled with a value proposition that is attractive to the younger workforce could become a huge challenge for traditional organisations to deal with," Hay Group India Director Debabrat Mishra said.

Interestingly, the start-ups face an employee attrition rate of 17 per cent with pay packets cited as the most common reason for the same. Job security was found to be one of the least important reasons for attrition.

As per the study, the start-ups use a mix of fixed annual compensation, benefits, and incentives (short-term and long-term) to reward their employees. While the mix varies across management levels, health and life insurance benefits are provided to all.

Stock options to top management levels are the most popular form of long-term incentives, given by 83 per cent of the startups, the study said.

"Start-ups earmark an average of 11 per cent of their stock-holding for long term incentives. Two-thirds of this stock is reserved for top management alone which confirms that wealth creation for top teams is a focus," Mishra said.

Canaan Partners MD Rahul Khanna was of the view that the Indian start-ups "are trying to create an empowering environment for their employees".

Maintaining open communication channels, facilitating flexible work timings and engaging employees through fun office activities are some of the more popular ways in which start-ups are trying to achieve this, he said.

For hiring purposes, professional networking sites were used by 55 per cent of organisations in scouting for top management, while middle and junior management roles are hired through recruitment agencies and online job portals.

A majority of the founders of the start ups are directly involved in hiring the candidates, Khanna said.

While 'interesting work' was more used for attracting talent to technology related function, opportunity for growth was prevalent for the sales job. In other functions, 'open culture' is the primary lever for bringing in talent.