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The average salary increment for employees in the startup sector was 8-12% for the 2022-23 fiscal year, reflecting the changed economic environment, said a report by Elevation Capital.

In its Startup PayPulse Report 2023, Elevation Capital noted that the salary increase range was attributable to individual and company performance, the quality and level of talent, and location.

According to the report, performance continued to hold 50% of the weightage on salary increments while taking on additional responsibilities and receiving a promotion factored in about 20%.

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Companies deferred salary increments or provided new stock grants in lieu of cash increments for leadership roles, the report said. For leadership roles such as CXOs and function heads, exploring stock-based increments may be more appropriate while also planning to reassess the cash component in a few quarters.

“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. 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 noted 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.

“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.