It’s an age-old dilemma for many business owners: how can you properly compensate top talent on your team without breaking the bank?
It’s often a tough balance, on one hand you understand the importance of compensation when building a strong, reliable, and result-driven team, but on the other, you might be finding it hard to adequately compensate your top talent compared to their market value.
You know that if they do a simple job search, they may see other businesses paying far more than you are, and worry they might jump ship for a more lucrative salary elsewhere.
Contrary to popular belief, there is an alternative option to compensation: employee equity.
Now, your initial reaction to such an option might be one of hesitation. You’re likely thinking giving up equity means giving up decision-making power in your business. Or, you might be wary about exploring an option that you’ve never really considered before.
Here are a few points on clarification:
1) Giving up equity does not mean giving up control.
Don’t get lured into thinking that giving equity to top talent means you’re giving up control. In fact, very rarely do employee equity compensation plans lead to you losing your decision-making power.
2) You don’t need to give equity to everyone.
It’s important that we make this distinction: equity in your business doesn’t have to be an organization-wide method of compensation. You can reserve this option for those who’ve been on your team for a certain number of years and that you’re committed to keeping in your organization.
3) Equity structures vary.
There is no “one size fits all” solution to equity structures.
There is a high degree of flexibility that can often depend on your business structure. You can also provide them with a “stock option” plan which gives the employee options at certain, extraordinary events and apply conditions upon which the employee must meet to earn those options.
The bottom line?
You have options in how you provide compensation to your team. If this sounds like something worth exploring, you may have several questions related to its execution such as tax-related issues, the fair amount of equity without giving up too much and so forth.
It’s important to keep in mind that moving forward with such an option requires reliable, and specific expertise. Talk to a professional about your options to ensure you have the best advice and guidance in making and executing this decision.