Why it pays to work for a start-up

Faster career growth prospects, employee stock options are among the key attractions for young workforce joining the nascent start-up ecosystem

Start-ups have become employees of choice for youngsters, and not without reasons. A first-time study of organisation practices in forty Indian tech start-up companies highlights that higher pay packets, faster career growth prospects, work culture, employee stock options are among the key attractions for young workforce joining the nascent start-up ecosystem in the country.  

Spread across sectors like e-commerce, online services, mobile applications and enterprise software, 82% of the respondents in the survey said that their compensation philosophy was to pay their employees above the market median. The average annual median pay in these technology start-ups ranged from Rs 5.5 lakh at junior management level to Rs 15 lakh at mid-management, and Rs 35 lakh for positions in senior management. The average annual salary range for junior management jobs in these start-ups ranged between Rs 3-8 lakh. For middle management positions average salary ranged between Rs 10 lakh and Rs 20 lakh, while at senior management levels average salary varied between Rs 25 lakh and Rs 45 lakh.

Apart from higher pay packets, brand visibility of consumer-facing start-ups, especially those in the e-com space, also played its part in attracting young talent, noted Debabrat Mishra, Director at Hay Group India. The study was jointly organised by management consultancy firm Hay Group and Canaan Partners, an early and growth-stage investment company.

Around 64% of the start-ups surveyed had a strong link between performance and compensation. Three out of every four start-up had a performance-linked component in the compensation package for the technology and operations teams, a mandatory feature among sales functions. As part of long-term incentive to employees, the start-ups earmarked on an average 11% of their stockholding for employees. Two-third of this stock (64%) was reserved for top management. Only 30% of start-ups offered stock options at junior management levels.

When it comes to hiring, almost one in every three new hires (31%) is selected through employee referrals. Employee referrals, social networking sites and job portal are most popular channels (64%) for hiring. Indian start-ups faced high employee attrition that ranged from 17% to 21%, driven by better salary prospects and long working hours. “The size of a start-up, coupled with the stage of funding, emerge as the dominant drivers of an organisation's practices,” said Rahul Khanna, managing director, Canaan Partners.