After Mass Layoffs, Most Indian Startups Intent On Keeping Appraisals Under 15%: Inc42 Survey

Building on a tenuous 2022, the next year is also not expected to bode well for the Indian job market. With the market volatility likely to intensify further in 2023, the negative market sentiment could weigh heavily on existing talent and new job seekers entering the workforce. 

A similar sentiment was echoed by Indian entrepreneurs that Inc42 surveyed. A majority of the startup founders felt that employees could see lower appraisals in the financial year 2023-24 (FY24). 

According to Inc42’s annual Indian Startup Founders’ Survey, as many as 63% of Indian founders said that they intend to keep annual appraisals under 15% in FY24. This could also mean that the employees may get anywhere between no appraisal to as much as 15% of their base salaries.

The survey is part of Inc42’s upcoming annual funding report 2022 which saw participation from more than 150 founders across the length and breadth of the Indian startup ecosystem.

Interestingly, 31% of the startup founders opined that employees at their respective startups could see pay hikes in the range of 16% to 30%.

Meanwhile, just 4% of the founders surveyed were considering appraisals in the range of 31% to 45%. In contrast, a mere 2% of entrepreneurs told Inc42 that they intend to grant more than 45% salary hikes.

This trend of reduced appraisals could be attributed to the purported funding winter that has gripped the startup ecosystem. As a result, funding has dried up which has forced many startups to cut corners and increase efficiency. At the outset, this saw startups undertaking retrenchments and fire employees in droves. 

Now, it looks like the sword also dangles over the heads of existing employees as startups look to spend less on employee benefits.

In what appears to be a divided house at the Indian startups, most startup founders do not plan on slashing new hiring in FY24 even as appraisals remain at stake.

The Inc42’s survey also noted that as many as 71% founders overwhelmingly said that they do not plan to slash new recruitment, while the rest said that they were considering reducing new hires in FY24. In total, the top executives plan to increase new hiring by nearly 15% in the next financial year.

The sentiment appears to be widespread. According to a report by staffing firm Teamlease, firms in the services segment including ecommerce, educational services and financial Services were positive about hiring more employees in Q4 FY23. It, however, remains to be seen how startups scale hiring amidst the rising tide of challenges.

The ecosystem continues to be bogged down by plummeting funding numbers and high cash burn. 2022 saw Indian startups firing more than 18,000 startup employees in mass layoffs across sectors. On the other hand, Indian startups raised a little more than $25 Bn in funding in 2022, down nearly 40% from $41.4 Bn it raised last year which forced the startups to run a tight ship and focus more on efficiency. 

As market volatility intensifies, those who were spared by the layoffs could also be impacted by the market downturn.

However, startups are hoping to turn things around in 2023, focusing on profitability rather than valuations as they aim to scale up.

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