Singapore start-ups pay lower base salaries than US peers, amid growing trend of equity awards

Start-ups in Singapore were also found to pay professionals a higher base pay than firms in the broader technology and general industries locally.
Start-ups in Singapore were also found to pay professionals a higher base pay than firms in the broader technology and general industries locally.ST PHOTO: KUA CHEE SIONG

SINGAPORE - Start-ups in Singapore pay employees lower base salaries than their peers in the United States, according to a recent survey.

But, while base pay is lower, start-ups here give out higher performance bonuses and are more inclined to offer cash-based incentives than their US counterparts, which tend to favour equity compensation.

However, there is a growing trend among Singapore-based start-ups to move towards equity compensation in a bid to attract and retain talent.

The survey, which concluded in the first quarter of this year, was conducted by professional services firm Aon in collaboration with government-owned venture capital firm SGInnovate.

More than 100 South-east Asian companies operating in industries such as e-commerce, logistics and fintech participated in the study, the results of which were released on Tuesday (June 15).

Professionals in start-ups here earn a base salary that is about 32 per cent lower than their peers in the US. The base pay difference is narrower - 12 per cent - for employees in managerial roles.

Mr Ravi Nippani, associate partner for human capital in Asia-Pacific, Middle East and Africa at Aon, said the gap in base pay between start-ups in Singapore and the US is not expected to narrow in the next five to six years, given the large gap at present and rising talent costs in the US as well.

"The biggest advantage for a lot of international VCs (venture capital firms) investing their money here is the return on investment they're getting, and the cost is far cheaper," Mr Nippani said.

"So the moment the talent cost in Singapore (starts to) shoot through the roof, I guess there will be a completely different strategy that the start-ups will have to look at."

The study also found that the majority of Singapore start-ups tend to have equity plans predominantly for staff in managerial roles and above, and that only 6 per cent of start-ups here with less than US$25 million (S$33.2 million) of invested capital have structured equity plans.

In comparison, all US start-ups surveyed have equity plans for all executive, professional and managerial staff.

But there has been an increasing trend over the past two to three years of start-ups in Singapore expanding equity ownership eligibility to more levels within their organisations, the survey found.

This is with the aim of promoting an ownership culture, with equity being increasingly used to attract, retain and reward key talent.

Mr Nippani said: "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."

This trend also reflects the growing difference in mindset towards equity compensation, which has not been as common in the region.

The mindset is changing amid more success stories and the emergence of more unicorns, Mr Nippani noted.  

Start-ups in Singapore were also found to pay professionals a higher base pay than firms in the broader technology and general industries locally, but larger organisations tend to catch up in terms of base pay at managerial levels.

Variable pay - cash-based incentives and equity - also tends to take up a significant proportion of total remuneration in larger organisations when compared with start-ups.