Why You Should Be Offering Options to Your Startup Employees
The hunt for top-tier talent is on across the startup world. Companies in all industries are getting fiercely competitive in the race to attract and retain skilled workers, with top employers massively boosting salaries and launching historical expansions of PTO (paid time off) and benefits.
If you are a startup founder, you might be worried that these efforts from companies with limitless resources could leave you at the bottom of the pile when it comes to highly skilled job seekers. It’s no secret that startups need the right talent to succeed. That’s why you need to get creative with your value proposition so that you can attract the right people even if you can’t offer six-figure salaries.
This is where share options come in. Share option schemes are a way of promising equity to your employees in the future. It gives your employees the chance to purchase shares in the company at a future date and for a pre-agreed price that will likely be well below the market value of those shares. Any startup can offer options to employees through a share option scheme, no matter how far along they are in their growth journey. Here are thebenefits of doing so.
Attract talent with limited resources
By far the most compelling reason to offer options to your employees is that it massively boosts your appeal as a place to work, even if you can’t pay the top salaries in the industry. With options, you are promising your employees that they will be able to build their wealth over time, should the company succeed.
With past successful startups, options have allowed many employees who stuck around to become millionaires, once the share value of the company began to jump. This is a very attractive proposition that will help you stand out among highly skilled job seekers.
Easier than shares
If you are an early-stage startup, you won’t be able to offer stocks to your employees directly. As this expert guide to options vs stocks explains, shares confer direct ownership in the company, as well as voting rights.
In the early stages, your shares will be earmarked to investors. Giving shares to all of your employees at this point would likely cause complications and shake the confidence of your investors. With options, you give your valued employees the chance to build equity in your company at a future date, assuming that the company takes off.
Make your people invested in your success
When people are invested in the success of the place that they work for, amazing things can happen. By granting options to your employees, you are sending a powerful message that their future wealth is directly tied to the fortunes of the company.
This has often proved to be a very powerful incentive, one that will push your top talent to go above and beyond in ensuring that your startup maximises its growth.
Options aren’tfor everyone, but they have been proven time and time again to be a powerful recruitment and retention tool for startups. It’s up to you to do your research and decide if, when and how you’d like to use a share option scheme in your company.