Indian Startups Experience Cool Down in Salary Increases for Tech Employees as Funding Slows
In fiscal year 2023, Indian startups have witnessed a decrease in salary increments for tech employees and leadership teams after a period of significant growth. This decline in salary hikes comes as startups seek to navigate a potential funding downturn. These findings were revealed in a survey conducted by Elevation Capital, which covered more than 200 startups.
According to the survey, salary hikes for tech employees and leadership teams ranged from 8 percent to 12 percent on average. The extent of the increment varied based on factors such as individual and company performance, talent level, and geographical location.
The Startup Paypulse Report 2023 highlighted that early-stage startups typically offered salary increments between 8 percent and 12 percent for technology roles. However, there has been an overall reduction in salary increase trends within the technology sector. Roughly 25-30 percent of companies deferred salary hikes for a quarter or two, while leadership compensation shifted from cash payouts to stock-based rewards.
The decline in funding for Indian startups can be attributed to the global economic slowdown and rising interest rates. As a result, startups have taken measures to cut costs, which include staff layoffs, downsizing operations, and delaying expansion plans.
To attract and retain talent amidst these challenges, Indian startups have adopted inflation-linked salary increments. However, the degree of variation in salary hikes is substantial, especially for technology professionals in smaller to medium-sized startups, who receive more moderate increments.
In terms of leadership positions, there have been compensation adjustments, restructuring, and a greater emphasis on stock grants instead of cash increments. The report highlighted that smaller startups with technology teams comprising fewer than 40 members offered salary increases in the range of 15 percent to 20 percent for entry and mid-level tech roles. These startups believe that this talent pool is crucial for their future success.
Despite fluctuations in macroeconomic factors, technology roles continue to experience significant salary hikes ranging from 20 percent to 25 percent. However, such increases are limited to no more than 10 percent of a company’s overall workforce.
The changing market conditions have necessitated salary corrections, particularly at the leadership level. Interestingly, job seekers are now more inclined to wait for the right job opportunity rather than accept suboptimal pay, as noted by Dipesh Jain, Assistant Vice President – Talent at Elevation Capital.
Overall, Indian startups are adjusting to the current funding climate by implementing salary adjustments and exploring alternative compensation structures. These measures are driven by the need to optimize resources while attracting and retaining top talent in a competitive market.
