Blog: Start-ups face high attrition despite good salaries

Compensation & Benefits

Start-ups face high attrition despite good salaries

Here's why despite paying high salaries and offering challenging opportunities, start-ups are facing high attrition
Start-ups face high attrition despite good salaries

I read an article that featured in Financial Times with this heading and it got me curious.


Indian start-ups are good paymasters with 82 per cent paying above the market median. Many Indian start-ups are doling out handsome pay packets, with junior level employees. However, Indian start-ups face attrition rate of as high as 21 per cent despite being good paymasters, says a study.

According to the study by global management consultancy Hay Group, in partnership with global venture capital firm Canaan Partners, 82 per cent of start-ups pay more than the market median and they also provide growth opportunities and interesting role content. This pay philosophy, coupled with a value proposition that is attractive to the younger workforce, could become a huge challenge for traditional organizations, he added.

Start-ups generally resort to stock options as the most popular form of long-term incentives, which is given by 83 per cent of them and their prevalence is largely in top management levels. Tweet this

Notwithstanding all these incentives, Indian start-ups still face an employee attrition rate of 17 per cent which rises to 21 per cent in growth start-ups and the most common reason for attrition was found to be pay, as cited by 34 per cent of the participants.

You could read the whole article here

The part that I am confused about is that if the employees are being hired at high salaries, being offered perks such as stock options and there is obviously a high sense of accomplishment as would be in any start-up, then why would they leave for higher salaries?

Clearly something is wrong.

I could think of a whole lot of reasons why the employees left, but that would be guess work. No better way of having a third-party speak to these employees and capture the exact truth about why they left the company.

‘Salary’ related reasons stated here sound more like the outcome and not the reason.

The puzzle in the story is:

We all look for work that provides us great learning, challenges our intellect and provides a sense of achievement upon meeting the goals and a good paying one at that. Clearly, an opportunity in start-ups ticks all those boxes. Then why do we still leave?

What happens next is even more interestingon the basis of our own wisdom and knowledge of such matters, the Sherlock Holmes in each one of us will have a convincing theory explaining exactly what’s wrong and why such high attrition.

We also make a predictionif the organization does not have the will to pursue the most granular truth behind why these employees left and be skewed by their own gut feel and by borrowing convenient parts of the thousands of theories floating around, they are destined to relive the problem much like Tom Cruise in the “Edge of Tomorrow” but with no hopes of improving the outcomes.

Having spent enough time and money to scout for talent, it is worthwhile for an organization to spend a little more effort in improving their understanding of what may not be working wellget a specialist third party to take a peek into what’s going on.

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Topics: Compensation & Benefits, #Retention, #TotalRewards

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