As the crisis deepens, startups swap cash bonuses for stock soap

Balance sheets of many edtech, software and fintech startups remain strained even after several rounds of layoffs to save costs. While some startups are shifting to Restricted Stock Units (RSUs), others are raising targets and asking their leaders to offer incentives. “A consumer media internet firm we work with that has seen some layoffs has also made their sales promotion harder and less achievable. Two SaaS unicorns we work with while they are on the job One of them has not given any bonus to the leadership team, but has retained some bonuses for other employees,” said Harold D’Souza, co-founder and director of search firm Walkwater Talent Advisors.

For example, SoftBank-backed edtech unicorn Unacademy said it would not offer cash evaluations to employees this year and would instead offer stock options based on individual performance.

The startup sector has laid off more than 20,000 employees since last year and the layoffs are expected to continue as the funding winter continues. Consulting firm Aon said the impact of these changes could drive young workers away from the startup sector. “Cash bonus is an annual component whereas ESOPs and other stock-based LTIs (long-term incentives) vest over 3-4 years, targeting retention, long-term performance and wealth creation. However, given the volatility in the markets and low upside opportunities in the medium term, young talent may not find ESOPs attractive,” said Rupank Chowdhary, partner, Human Capital Solutions, Aon India. Chowdhary has also observed that restricted stock units are being granted. A Bengaluru-based software startup is tweaking its pay structure by including incentives within the total compensation package. Rewards in compensation as compared to those outside it and aligning it to roles,” said the startup’s said a senior executive who did not wish to be named.

Those keeping their structures the same are offering meager incentives, sometimes double the salaries compared to a year ago when companies were luring talent away. “At Whatfix, we are focused on being more sustainable and efficient by driving greater accountability and productivity, from our leaders down to the last employee. “The plan is to achieve this by setting clear direction and defining measurable outcomes for everyone involved,” said Romita Mukherjee, global head of human resources at enterprise software platform Whofix.

devina.sengupta@livemint.com