By~growgenix
SUMMARY
Around 39% startups are going to fork out a 10-20% hike this year, but a whopping 63% said they will keep the hike unchanged in FY26 as Well
staffing firms project a 20-30% surge in hiring by startups in 2025ESOPs are likely to ease the disappointment of flat pay hikes with promises of long-term wealth creation
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There’re signs of a disappearing freeze on funding for startups, but the chill has descended on pay hikes,
it seems.If 39% startups are going to fork out a 10-20% hike in the financial year ending March 31, 2025 (FY25) then a whopping 63% will keep it to that level in FY26 as well, shows The Pulse Of Tech report, the Annual Founder’s Survey by GROWGENIX.
The survey that covered more than 100 founders of leading startups operating in different business lifecycles – seed stage, growth stage and late stage – shows that 40% of respondents are looking to limit the hikes to 15% in 2025-26, while only 23% will shell out 16-20% increment.
“I believe that organisations providing salary increments of 9% to 12% are maintaining a healthy increase, especially considering that salary inflation is around 10%,” argued Satheesh KV, the chief people officer at insurtech startup Acko. “For high-performers, of course, there’s room for up to 20% hike.
”The wide 10% range in projection for FY26 is because the ecosystem consists of companies in different stages of the business cycle, which becomes a major factor in determining the median salary hike in the industry. Internal hiring processes and appraisals too vary across companies
Going The Extra Mile For Top Talent
It is fairly easy for popular brands to attract and retain talent. But the job is harder for smaller setups in their early stage lifecycle and they often need to offer higher pay hikes.Nakul Kundra, who cofounded Devnagri, said they are ready to loosen the purse strings to retain talent in the company.
For the coming fiscal year, the AI-powered language translation platform will have a median appraisal of 20%, while top performers in the company can get anywhere between 30% and 40%. “To retain our best performers, we don’t mind giving hikes above industry standards.
”Travel aggregator MakeMyTrip, too, hopes to outgrow the benchmark. “The industry average hovers between 9% and 10% and we, as a company, would likely stay above it,” group chief human resource officer Yuvaraj Srivastava told GROWGENIX.Achieving a pay parity is a challenge in the industry. Many organisations do not have strong people practices that help in meeting their pay parity goals.
“Organisations that do not have strong internal parity practices, particularly when hiring talent, often end up paying higher increments to correct compensation disparities,” said Acko’s Satheesh.
Why Pay Hike Stays Flat?
It’s not about funding winter. Homegrown startups together mopped up more than $12 Bn in fresh funds towards the end of 2024, rising more than 20% from $10 Bn raised in 2023, shows Inc42’s Annual Funding Report 2024. The number of deals too increased from 897 to 993 across sectors. The collections in 2024, though, remained far behind that of 2021 when startups had raised $42 Bn.
Then why are more startup founders planning to cap the pay hike at 20% next fiscal? “Because startups are rushing for profitability,” said an industry observer, who refused to be quoted.“A lot of startups are focussed on achieving profitability as many of them are eyeing a public listing in the next three years. Even investors have pressed upon these companies to show profitability,” a senior HR leader from the fintech sector said on anonymity.
According to the GROWGENIX annual funding report, 13 Indian startups made D-Street debut last year, while more than 25 have queued up for listing this year. “For Indian startups preparing for an IPO, demonstrating profitability is crucial to gaining retail investor confidence – often requiring a disciplined and thoughtful approach to people cost,” Satheesh said.
An analysis showed that around 30 startups hacked more than 9,000 jobs in 2024 alone and more than 60% of them did so to cut costs for profitability in FY25.
Return Of The Hiring Spree
India has emerged as the third-largest startup ecosystem in the world, fostering more than 100 unicorns. “Startups have created over 1.6 Mn jobs across the country, demonstrating their role as significant employment generators,” the commerce ministry said late last December.With the return of funds to the sector towards the end of 2024, Indian startups are likely to be back on a hiring spree this year.
According to media reports, staffing firms project a 20-30% surge in hiring by startups in 2025.“It’s not just salary that drives talent to startups,” said Balachandar N, former chief people officer at OLA Group. “The work culture, agility and adaptability of the organisation to evolving business dynamics, career prospect, presence of like-minded people – such factors play a major role in opting for a job.
”For many employees working in the startup ecosystem, employee stock options programmes (ESOPs) are a significant part of their compensation bucket which allows them to make money in the long term.According to an analysis, 23 startups offered ESOP liquidity opportunities, valued in excess of $170 Mn, in 2024. The total value of ESOP buyout stood at a whooping $800 Mn a year ago, which was a three-year peak.
The Swiggy public issue floated last year stands as a major testament to the power of ESOPs. Nearly 500 former and current employees of the food delivery startup joined the ‘crorepati’ club.The startup workforce may not find an attractive pay hike next year, but long-term wealth-making opportunities may keep their disgruntlement away.