Appraisal: Funding winter or not, startups loosen purse strings to reward top talent

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India’s startup companies are rewarding and ringfencing critical talent more than ever, amid continuing job cuts and a shift in focus to profitability from business growth in a sector hit by a protracted funding winter.

Companies such as UpGrad, Plum, Simplilearn, Eruditus, Shiprocket, Urban Company, CashKaro and Simpl are rewarding their top performers with disproportionately high increments, stock options, performance-related bonuses, non-monetary incentives, larger or global roles and accelerated promotion tracks.

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Most of these companies expect increments to be in line with last year, though compensation experts say overall hikes for the sector are likely to be lower this time.

“Market conditions have made appraisals real and competitive. Most companies are disproportionately rewarding top performers as the cost of attrition for C-suite is 77% (of cost to company), mid-level is 47% and entry-level is 36%,” said Mukul Kanchan – head of finance at insurtech startup Plum.

“The threshold for non-performers is low and companies want to reward and retain A-players,” he added.

At CashKaro, salary increments for the top performers can vary from 25% to 100% (including stock options), said Swati Bhargava, cofounder of the cashback and coupons platform. “Top talent is hard to find. If we have people who are driving success, then we always find a way to ensure they are well-compensated, regardless of where else we may need to cut spends from.”

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Differentiated approach

Startups are exercising strong discretion in identifying and differentiating between low and high performers as part of appraisals, said Krishna Malladi, director, Deloitte.

Top performers at startups are likely to receive increments at 2.0-2.2 times the average performance, a differentiation stronger than the rest of India Inc, he said.

Average increments in the ecommerce industry are expected to be moderately lower than the previous year, with early projections suggesting hikes between 7.9% and 8.1%, said Malladi. However, there are significant variations in increment trends within the sector.

To motivate and retain top or critical talent, companies in the startup and ecommerce space are looking at implementing differentiated salaries, long-term incentive programmes and career development opportunities, said Mansee Singhal, partner and rewards consulting leader at Mercer India.

Pay for performance

In the edtech space, which has been through its share of turbulence, companies are stretching themselves for top talent.

“We are focused on ringfencing the AAA-listers (key talent) and rewarding deserving colleagues in appraisals,” UpGrad chief HR officer Saurabh Deep Singla said. It creates a differentiated approach for top performers and fosters a culture of ownership and empowerment through long-term wealth creation opportunities, career development opportunities, etc., he said.

At Eruditus, the appraisal process focuses on disproportionately rewarding top talent & high performers, said cofounder Ashwin Damera. Besides equity, the company that provides executive education programmes has top talent moving into larger roles, taking up key business and strategic positions, even at a global level.

While the startup ecosystem has seen its highs and lows, the firms are getting mature now and acting like large companies when they do appraisals, in a more disciplined way, said Krishna Kumar, chief executive at Simplilearn.

“The appraisals this year will be better than last year. While we will spend wisely, top performers will be rewarded with maximum perks,” he added.

Besides merit-based increments, promotions and opportunities for career advancement, top performers at logistics startup Shiprocket may also get performance-based bonuses or equity incentives, said group chief HR officer Saumya Khati.

At on-demand home services startup Urban Company, high performing employees are rewarded with higher rewards and equity; payments platform Simpl will grant stock options to select top performers.

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