Aon recently released the results of Aon’s 2021 Private Market Compensation survey. The study, a first of its kind in Southeast Asia, focuses on critical compensation data to help organisations create a compelling compensation package that can differentiate an employer from the competition and aid in scalable hiring plans.
Base salary trends change at higher levels for Singapore start-ups
The study found that base salaries at Singapore start-ups pay more (6%) than those in the broader Technology (Tech) and General industries, across Professional individual contributor levels.
The playing field levels out at Managerial levels, with start-ups paying 5% less than companies within the General and broader Tech industries. Whilst base pay quantum is quite similar across the three categories of companies, variable pay (cash and equity) tends to take up a significant proportion of total compensation in larger organisations, as compared to start-ups.
Key differences in base pay of start-ups in Singapore and the U.S.
Start-ups in Singapore enjoy a large talent cost advantage compared to their U.S. counterparts. The study finds that the cost of comparable talent in Singapore is significantly lower at both the Professional individual contributor and Managerial levels. The base salary of start-ups in Singapore compared to the U.S. is, on an average, 12% lower across Managerial levels and 32% lower across Professional individual contributor levels.
However, while the base salaries are lower, Singapore start-ups are more aggressive with their target performance bonus (cash) plans than their U.S. counterparts.
At the Managerial level, target bonus for start-ups in Singapore is at 20% compared to 13% in the U.S. At the Professional individual contributor level, target bonuses were also reported to be higher in Singapore (15%) than in the U.S. (10%). The study also finds that start-ups in Singapore are more inclined toward cash-based incentives than their U.S. counterparts.
Ray Everett, CEO, Asia Pacific and the Middle East & Africa for Human Capital solutions, Aon, said:
“The rapidly evolving business environment is compelling entrepreneurs to look for low-cost geographies that support ease of business and fast track the development of their solutions. Substantial talent cost arbitrage coupled with availability of strong technical talent makes Singapore a preferred destination for start-up founders and investors.”
Equity trends among Singapore start-ups
U.S. start-ups have traditionally used equity for wealth creation for employees, across all levels. For example, the study finds that 100% of the U.S. start-ups surveyed extend equity to all Executive, Managerial and Professional individual contributor levels. Ninety percent of them also extend equity awards to Entry and Support level roles.
Contrastingly, 90% of start-ups in Singapore tend to have equity plans predominantly for roles that are at Managerial levels and above. Only 6% of start-ups in Singapore with less than USD 25 million invested capital have structured equity plans.
However, the study finds an increasing trend over the past two-three years wherein start-ups in Singapore are expanding the eligibility criteria for equity ownership to more levels within their organisations. New and smaller businesses are increasingly moving towards this model of equity compensation for broader levels with the aim to promote an ownership culture and attract the right kind of entrepreneurial talent, regardless of role level.
Clear differentiation between Tech and Non-Tech roles
There is a clear differentiation in equity guidelines between Tech and Non-Tech roles among both Singapore and U.S. start-ups.
Tech talent are provided with higher ownership percentages in both countries. In Tech roles, equity guidelines are close, with 0.076% for the U.S. and 0.055% for Singapore, at the Professional individual contributor level. For Non-Tech roles at the same level, there is a gap between U.S. (0.038%) and Singapore (0.017%) companies.
Ravi Nippani, Associate Partner, Asia Pacific and the Middle East & Africa for Human Capital solutions, Aon, said, “Singapore-based founders are increasingly using equity as a preferred vehicle of compensation, to attract, retain and reward key talent. In these uncertain times, this also helps conserve much needed cash reserves. The lower talent costs result in significant savings that can be deployed to product development in the initial stages of the start-up.”