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%
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