Now, startups offer hefty pay packages

Bengaluru : MANY startups are paying out hefty salaries to hire new employees on the back of funding frenzy and race to roll out new products in the market place.

While hiring and salary hikes have been badly hit in traditional sectors in the last one year due to the Covid pandemic, many technology-based startups are also doling out hefty salary hikes to their employees.

"It (hefty salary) is not only for the top people, it is also happening at a junior level. For instance, professionals with skills like full stack development, cyber security with 3-4 years of experience are paid very high levels of salaries," said Aditya Narayan Mishra, Director and CEO of CIEL HR Services.

"It is mostly happening in the technology-driven startups, where app developers are getting paid Rs 50 lakh- Rs 60 lakh salary with 5-6 years of experience," he added.

The hiring boom and fat salaries are mostly linked to the funding frenzy that domestic startup ecosystem has seen in the recent time. During the January-March period of 2021, the flow of risk capital into Indian startups increased to $3.65 billion as compared to $3.22 billion of inflows seen in the same period of last year. Total funding in FY21 stood at $12.36 billion, according to data intelligence platform Tracxn. Amid the funding frenzy, India has seen addition of 14 unicorns- startups valued more than one billion dollars- in the first five months of 2021 as compared to 11 in all of 2020.

Experts cite the higher fund flows to technology-based startups becoming the major reason behind fat salaries being given to new employees. Not only funding inflow, but also highly profitable technology startups have witnessed good payouts to top employees including promoters.

Recently, the discount broking company Zerodha has passed a resolution for allowing the three directors of the company to draw a salary that may equal Rs 100 crore each every year. The company's co-founder and CEO Nithin Kamath, however, has clarified later that the actual salaries will be less than the reported figure.

Meanwhile, a survey conducted by global professional services firm, Aon had found that senior executives at startups in India could expect a salary hike of 8.5 per cent to 9 per cent in 2021-22.

While hikes and hefty pay cheques for new employees are signs of ample liquidity in the startup ecosystem, experts see it as a bad practice as far corporate governance norms are concerned.

"The repercussion (of such hefty salary) is that it creates a lot of imbalance and disparity within the team. From organisation building perspective, it is a very bad strategy unless the company gives a very unique role to the professional paid that kind of high salary," said Mishra of CIEL HR Services.

Some sources also said that salary hikes are not across the startup ecosystem. "Many startups have let go of people during the last one year and many also have put hiring freeze as their businesses have suffered due to the pandemic. So, these hikes are not across the board," said a source who helps startups in raising funds from investors.