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Small, medium start-ups struggle to retain talents in ‘salary war’
Small and medium start-up companies operating in Indonesia are prioritizing training programs and a supportive work culture rather than boosting pay in an effort to retain talents amid a fierce salary war
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span>Small and medium start-up companies operating in Indonesia are prioritizing training programs and a supportive work culture rather than boosting pay in an effort to retain talents amid a fierce salary war.
A limited talent pool amid the fast-growing digital economy has triggered a high employee turnover in start-ups, which involves astronomically high salary figures.
Human resource startup Urbanhire chief executive officer Benson Engelbert Kawengian should find another way to retain his 60 employees while the country’s unicorns, start-ups with a valuation above US$1 billion, do head hunting to expand their teams.
“We cannot compete with the salaries of unicorn companies,” Benson told reporters in Jakarta on Tuesday.
“[Therefore], we provide a development class for our employees every Friday so that they can grow. Other than that, we are trying to build a good working environment by allowing the staff to make collective rules,” he went on to say.
Online grocery shopping platform HappyFresh human resources business partner Borries Abridita voiced a similar view.
“We would like employees to stay but the career path is limited, not everyone would make it to managerial level so the high turnover rate is a common thing,” he said. “The challenge is how far our salary can compete [with those of other start-ups]. It’s useless if we can hire them but they work for less than three months before eventually resigning.”
In a recent interview with The Jakarta Post, Amazon senior vice president of global corporate affairs Jay Carney said there was an urgent need for Indonesians to upskill themselves amid the deficit in digital talent, which is why Amazon Web Services decided to roll out a cloud skills enhancement program for hundreds of thousands of Indonesians by 2025.
He quoted a 2018 study by the McKinsey Global Institute and the World Bank that projected a shortage of 9 million skilled and semiskilled workers for the digital sector in Indonesia between 2015 and 2030.
Communications and Information Minister Rudiantara also said in May that the country needed around 600,000 skilled workers in the digital sector every year.
Singapore-based hotel management startup RedDoorz also relies on a supportive work culture and talent development program to retain its workers.
“We operate in a competitive environment and we have employees who have been offered better salaries but they stay because they understand that success is part of a strong working environment and having good relationships with colleagues,” RedDoorz chief commercial officer Marshall Silver told the Post.
“A work culture that makes people feel empowered and a clear path to career enhancement, as well as professional development, are more important than salary,” he added.
According to research by Harvard Business Review, Benson said, there were four reasons why employees chose to stay, namely job satisfaction, company environment, work opportunity and external factors.
“The first two factors are important especially for young workers,” he said.
Urbanhire and RedDoorz both said most of their employees were of the millennial generation — who are between 21 and 35 years old. Urbanhire has a turnover rate of 10 percent while RedDoorz’ is 20 to 25 percent.
Large start-up companies, including unicorns, are flexing their budget to acquire top talents as there is a lack of digital talent available on the market, according to Indonesian E-Commerce Association (idEA) chairman Ignatius Untung.
“Big start-up companies are willing to pay more to get the top talents due to talent scarcity in the market,” said Ignatius in a phone interview. “They hire more top-notch digital talents compared to small and medium start-ups.”
He admitted that the turnover rates in start-up companies were higher than in more established industries but denied that salary was the main reason workers were moving to other companies.
“We could not say that it is only because of salary. There are other factors, such as learning opportunities, career development and workers seeking new challenges.”
A study titled “Indonesia Millennial Report 2019” published earlier this year by Indonesia-based IDN Research Institute found that the reasons the young generation was moving from one company to another were lack of self-development (26 percent), salary (17 percent) and work environment (15 percent).
The study also found that 35 percent of millennials wanted to stay at one company for two to three years, followed by 27 percent who would like to stay for four to five years.
Urbanhire CEO said many employees left after spending two to three years in the company. “We have some products that are already mature and those who worked on the products are now leaving. That is the nature of the business.”
