Tech Star­tups, Ecomm Cos Cut Down on Join­ing Bonuses

From 15% of cost to com­pany, join­ing bonuses have seen a grad­ual fall to 6-7%

The Economic Times - - Career & Business Life -

Anu­meha Chaturvedi & Rica Bhat­tacharyya

New Delhi | Mum­bai: With the fund­ing frenzy cool­ing down and con­cerns of a val­u­a­tion bub­ble ris­ing, In­dia’s tech star­tups and ecom­merce com­pa­nies are cut­ting back on plum join­ing bonuses.

“Join­ing bonuses, used to lure qual­ity ta­lent fast, are be­ing of­fered to about 10% of the staff now from 30%-40% a year ago,” said Anshuman Das, man­ag­ing part­ner at ex­ec­u­tive search firm Long­house Con­sult­ing. “Ear­lier, it could have been about 15% of the CTC (cost to com­pany, or to­tal money an em­ployer spent on an em­ployee in­clud­ing all ben­e­fits in a year), but now it has come down to about 6-7%,” he said.

“Com­pa­nies are wait­ing and op­er­at­ing on bud­get op­ti­mi­sa­tion prin­ci­ples,” Das said.

Search firm ex­ec­u­tives said com­pa­nies such as Flip­kart, Ola, Snapdeal, Uber, and Quikr have all slashed join­ing bonuses, in­creas­ingly want­ing to link pay to per­for­mance.

Mails to Flip­kart, Ola, Uber and Quikr were unan­swered as of press time on Thurs­day while Snapdeal de­clined to com­ment. Ex­perts said ecom­merce com­pa­nies have be­come pru­dent as they are un- der pres­sure from in­vestors to fo­cus on prof­itabil­ity.

“Over the last 2-3 months com­pa­nies have be­come much more cau­tious and se­lec­tive in giv­ing join­ing bonuses. This is also prompted by a close vigil by the in­vestors,” said GC Jayaprakash, ex­ec­u­tive di­rec­tor at RGF Ex­ec­u­tive Search. He said many com­pa­nies are also com­ing up with new method­olo­gies, and in­stead of giv­ing out a lump sum one time join­ing bonus they are shift­ing to one off pay­ment based on in­di­vid­ual and com­pany per­for­mance.

Navin Hon­agudi, in­vest­ment di­rec­tor at in­vest­ment firm Kae Cap­i­tal, said join­ing bonuses have been slashed by 50% in one of their in­vestee com­pa­nies, True­bil, a mar­ket­place for pre-owned cars. “The en­vi­ron­ment is sta­bil­is­ing and we are see­ing a fair bit of con­ver­sion. Can­di­dates are plac­ing a lot more im­por­tance on the qual­ity of the work rather than the CTC alone,” he said.

Kae Cap­i­tal’s other in­vestee com­pa­nies in­clude health­care por­tal HealthKart, dat­ing app Truly Madly and lo­gis­tics mar­ket­place The Porter. Narayan R Tham­ma­iah, chief peo­ple of­fi­cer at Ac­cel Part­ners, said, “A lot of star­tups went to the IITs and IIMs and made of­fers but they could not recog- nise the cost burn. Link­ing pay to per­for­mance is in line with mov­ing to­wards a mer­i­toc­racy.”

He, how­ever, said it’s a de­mand sup­ply mech­a­nism. “Com­pa­nies will still pay a pre­mium and join­ing bonuses for cer­tain skills and roles like dig­i­tal mar­ket­ing or good prod­uct man­agers,” Tham­ma­iah said. Some com­pa­nies like Paytm and Lime Road said they have al­ways avoided pay­ing a join­ing bonus.

“We be­lieve that peo­ple join­ing star­tups should come in first for the thrill of cre­at­ing some­thing mag­i­cal, and sec­ond, for cre­at­ing long-term value and wealth. Join­ing bonuses fly in the face of this, at least in early stage,” said Suchi Mukher­jee, founder and CEO at LimeRoad. “If there are folks who are for­go­ing bonuses else­where we find ways to com­pen­sate them in the cash fixed and vari­able struc­ture, but avoid join­ing bonuses,” she said.

Oth­ers like Knowl­ar­ity, Car Dekho and Ur­ban Clap said join­ing bonuses have been given in ex­tremely rare in­di­vid­ual cases.

“We use dif­fer­ent tools like join­ing bonus, an­nu­ity, re­ten­tion bonus, esops, etc. to reach a win-win sit­u­a­tion,” said Anu Ya­dav, HR head at Knowl­ar­ity. “Be­ing a startup, our peo­ple re­quire­ments are al­most al­ways 'needed as of yes­ter­day'. Hence, we use join­ing bonus in cases where this might en­cour­age a can­di­date to come on board quicker or help him/her man­age their no­tice pe­riod buy­out,” she said.

E-comm cos have be­come pru­dent as they are un­der pres­sure from in­vestors to fo­cus on prof­itabil­ity

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