Venture capital funds are likely to offer annual salary hikes of not more than 8-10 per cent and may resort to hefty cuts in bonuses, even as their startup investments are facing challenges, according to a livemint report. The 8-10 per cent likely salary hikes are way lower than the 25 per cent hike witnessed during the investment boom period.
“FY23 was a tough year for VC funds as their existing portfolio had taken a hit. The VC markets shifted to India in 2019-2021 on the back of big deals. That came crashing, and because of last year, bonuses will be slashed by 40-50 per cent. Bonuses are 100 per cent of fixed pay. FY24 is expected to see an uptick on the back of improvement in consumer tech and SaaS-driven investments,” said livemint quoted Anshul Lodha, head of recruiting firm Page Executive (sIndia), as saying.
Venture capital investments in India dropped by a third to $25.7 billion in 2022 from $38.5 billion in the previous year, according to a March report by Bain & Co and the Indian Venture and Alternate Capital Association (IVCA).
According to the report Navnit Singh, chairman and regional managing director of executive search firm Korn Ferry, said the tough phase will also take a toll on increments. “It was normal for VCs to roll out 25 per cent raises, but because of the dip in last fiscal, they may give 8-10 per cent hikes.”
According to the recent Deloitte India Talent Outlook 2023, the average India increment in 2023 is expected to go down to 9.1 per cent from 9.4 per cent in 2022. One in every three organisations is planning to give double-digit average increments.
The Deloitte report said 2023 increments are expected to be lower across almost all sectors, compared to 2022 actual increments. “While the Life Sciences sector is expected to witness the highest increments in 2023, the IT sector will likely witness a major drop in increments as compared to 2022.”
The attrition rate in India reached 19.7 per cent in 2022, up from 19.4 per cent in 2021.
Anandorup Ghose, partner at Deloitte India, said, “The significant attrition levels across industries in late 2021 continued until early 2022. We saw Indian organisations budgeting the highest increment in 2022 over the last four years. What they also did was hire aggressively. This led to employee costs rising faster than revenue growth over the last 3–4 years in almost every other company. Stubborn inflation, higher interest rates, and a slowing economy are likely to make organisations more cautious this year. We expect increments and attrition to witness lower trends in 2023.”
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