Indian startups give salary hike of 8-12% in FY23, favour ESOPs: Study

Stock offer key component in increments for senior leadership roles, it says

Indian startups gave employees salary increments between 8-12 per cent on the average in Financial Year 2022-23 (FY23), said a report on Thursday.

Performance was 50 per cent of the weightage in salary increments and taking up additional responsibilities and receiving a promotion factored in about 20 per cent, said the 'Startup PayPulse Report 2023' by Elevation Capital.

Employee stock option (ESOP) continues to be a key component in increments for senior leadership roles. Given the muted cash increments observed in the last financial year, 50 per cent of startups explored offering additional equity grants to leaders.

“In the face of macro challenges, Indian startups are showcasing adaptability by offering inflation-led salary increments to attract and retain talent. However, the variation is significant, with technology professionals in small to mid-size startups seeing moderate increments,” said Kallan H, VP -- talent, Elevation Capital.

“We are observing a cultural shift in how ESOPs are viewed by employees and startups, with higher buy-in at the leadership level. We anticipate demand for AI (artificial) talent to stay elevated going forward, followed by product, engineering and other functions,” he said.

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ESOP allocation usually constitutes 10-50 per cent of the cash component offered to candidates for entry to mid-level roles in startups. Those in leadership positions receive ESOPs ranging between 0.2 per cent and 1.5 per cent of a company’s equity.

“Given the muted cash increments observed in the last financial year, 50 per cent of companies have explored offering additional equity grants to leaders,” said the report.

“The shift in the market situation has led to a correction in salaries, though largely at the leadership level. Interestingly, on the other hand, job seekers are willing to wait longer for the right job opportunity than settle for less-than-ideal pay,” said Dipesh Jain, AVP -- talent, Elevation Capital.

Bangalore and Hyderabad topped Indian cities for technology talent availability, having a combined share of 72 per cent.

Some critical roles filled among the first few hires at early-stage companies are chief of staff/ founders’ office, growth, and finance.

India’s count of startups increased from 350 in 2014 to more than 90,000 in 2023. There are more than 100 unicorns (a privately held startup valued at over $1 billion).

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This report included data from more than 200 startups and over 1,000 candidates; it was reaffirmed by the recruitment consulting partners FIDIUS Advisory and Transearch.