Employees at Indian startups received average salary hike of 8-12% in FY23, just enough to cover inflation, according to a report by Elevation Capital. “Salary hikes have been subdued in FY23, with most startups increasing salaries in the range of 8-12%,” the report titled ‘The State of Indian Startups 2023’ stated. “This is just enough to cover inflation, which is expected to be in the range of 6-7% in FY23,” the report added.
Evaluation metrics for salary hikes, the report found, was dominated by performance which continued to account for 50% of the weightage while taking on additional responsibilities and receiving a promotion factored in about 20%.
The report also found that quality of talent is becoming increasingly important for startups. In order to attract and retain top talent, startups are offering a wider range of benefits, such as flexible work arrangements, stock options, and mental health support.
Startups are increasingly looking to hire from tier-2 and tier-3 cities in lieu of lower cost of living which allows startups to offer higher salaries and benefits, the report added.
Despite headwinds in the Indian startup ecosystem, the report predicts that the long-term fundamentals in the country remain strong.
“In the face of macro challenges, Indian startups are showcasing adaptability by offering inflation-led salary increments to attract and retain talent.
“Technology professionals in small to mid-size startups are seeing moderate increments. For leadership roles, we are seeing compensation correction and restructuring as well as new stock grants instead of cash increments,” said Kallan H, VP – Talent, Elevation Capital.
The report stated that 80% of the companies employ an ESOP vesting cycle of four years, while the remaining 20% have a vesting period extending beyond four years. ESOP allocation typically constitutes 10-50% of the cash component offered to candidates for entry to mid-level roles in startups ranging from Seed to Series B stages. Given the muted cash increments observed in the last financial year, 50% of companies have explored offering additional equity grants to leaders, the report added.
“With a significant talent pool of mid to senior-level executives available in the market, companies are focusing their efforts on a select few roles, investing more time to ensure the perfect fit. The shift in the market situation has led to a correction in salaries, though largely at the leadership level,” said Dipesh Jain, AVP – Talent, Elevation Capital.