Here’s the salary hike startup executives can expect in 2021
Senior executives at startups in India can expect a salary hike of 8.5 per cent to 9 per cent in 2021-22, according to an executive rewards survey conducted by global professional services firm, Aon. This is higher than the 6 per cent hike expected for other India Inc senior executives. Executives at ecommerce and venture capital-backed companies can expect a salary hike of around 10.1 per cent compared to 8.3 per cent last year. The annual survey, in its 10th year, analysed data from 504 companies across 20-plus industries.
For middle management employees, a median hike of 7.8 percent is expected in the financial year 21-22 (April-March) across industries (including the startup ecosystem). Junior management executives can expect an 8.1 per cent hike.
To be sure, last year there were several startups that did not have salary increments. In fact, many laid off staff and cut salaries, in a bid to stay afloat amidst the coronavirus crisis. However, Aon believes the worst is over and the mood is now positive. “Not seeing pay cuts at the moment. With the coronavirus vaccine drive underway, there is hope and a general mood of positivity that things will improve significantly over the next few months” says Nitin Sethi, partner and CEO (Chief Executive Officer) of Aon’s performance and rewards business in India.
The pandemic’s impact on salaries has been less severe than that of the global downturn in 2008-09
Aon’s research shows that the COVID-19 pandemic’s impact on salaries has been less severe than that of the global downturn in 2008-09.
“The COVID-19 pandemic had less of an impact than the 2008-2009 global financial crisis, when actual salary increases for senior executives dropped by 6.2 per cent,” says Nitin. Amidst the coronavirus pandemic, median salary hikes for senior executives across industries fell 2.9 per cent to 5.2 per cent in 2020-21 from 8.1 percent in 2019-20.
However, the variable pay of top executives has been understandably hit as most businesses have failed to meet growth targets in a challenging and unprecedented environment. Executives who had a ‘meets expectations’ rating in their appraisals are expected to receive 85 per cent of the pay-out for 20-21, compared to 95 per cent in the previous year.
Excluding long-term incentives (LTI), the median CEO compensation in India ranges from Rs 15 crore for owner-promoter CEOs to Rs 3.63 crore at Indian private companies, according to Aon.
The sum of variable pay and LTI as a percentage of total compensation is 52 per cent for CEOs in India compared to 87 per cent for CEOs in the US.
For founder-CEOs of mid to late stage startups in India, the median compensation is around Rs 2.1 crore with a mix of 70 per cent fixed and 30 per cent variable pay, as per the global professional services firm. For non-founder professional CEOs, the compensation is around Rs 2.9 crore, with the same 70:30 mix.
Nitin points out that startups and investors typically start looking at hiring professional CEOs by the time they raise their Series B round of funding.
Apart from CEOs, the highest-paid executives in 2020-2021 were the COO (Chief Operating Officer) and CFO (Chief Financial Officer), followed by the Sales Head and Chief Human Resources Officer.
The Legal Head and IT Head were among the lowest-paid executives, according to Aon’s research.
Strategy and Finance continue to be the top remunerative functions for executives. The survey data also showed that financial institutions and the fast moving consumer goods (FMCG) sectors continue to lead on executive pay in India.
While financial institutions’ executives are expected to get a salary hike of 6.5 per cent in 2021-22, compared to 5.3 per cent last year; FMCG executives are likely to get a salary hike of 7.6 per cent in 2021-22, against 7 per cent last year.