How to Set Compensation Structure for Your Start-up which is Getting Started?

Responsive image

 “How to cash out without killing your start up in the cradle?” This is a question for whose answer every start up founder is struggling for. As they are the early stage start up, matching the market trend with cushioned perks is challenging.

Start-ups need top talented workforce to help them growing business. But without enough cash flow, they can't get the money to pay them. Unquestionably, start owners might be willing to work 24*7 with little financial remuneration for many months. But they can't assume an employee to do the same. So how can these small business compensates the top-level talent you to boost business?

The answer to this is Startups has to first figure out with the compensation structure that needs to be offered to ‘hire and retain’ employees. Here are the several compensation tips that are ‘must to follow’ when you have limited funding or restricted budget.

Infuse Professional training and development

Let the employees leverage the new skills and technologies while working in your company. When it comes to learning, start-ups allow professionals invest their time to have a continuous growth in their career than in a traditional workplace. Encourage them and give opportunities to excel, to set their goals and also review it timely. Founder will definitely have to keep patience and will have to add up a cost in doing so but in later stages, this training and development of employees will make him earn millions.

Make them join courses, advance or a program where they get to learn and meet minds full of knowledge in the industry. Take employees over a lunch, share the experiences and learn something new. Show them you are a Team and you care about your employees and their successful profession.

This infusion can help you draw attention and recruit more head counts easily!

Equity Compensation

Since it is a start-up, it becomes really difficult to pay out high base salary. While recruiting new bees, show and emphasize the knowledge and benefits they will gain here. One should know when to use Equity compensation as it is a very effective component helping to bridge the gap between the employee’s ex company salary and a start-up salary. Giving away the stock options to employee make them feel valuable and a sense of ownership for a company.

We may add-on one criteria to retain employees for long term i.e. avail them the equity while on-boarding that vests over three-years with a one-year cliff. So, if an employee resigns within few months, tempt them with the equity/shares that they will be leaving behind which they own while working here. They can turn it into huge Cash as company prospers, show them how their contribution might help to increase the stock price and earn incredibly.

Pay for performance

Employees hard work and smart work should be rewarded. If the start-up cannot match the market set salary, one can offer with bonus structure, commission pay or other performance incentives to employees at regular interval. This energize the employees to work harder and make extra efforts to achieve the target. In fact, hire a candidate with hunger, if they achieve the defined target they will be rewarded as per their performance.

Commission, incentives does not only meant for sales person, it can be rewarded to any employee say a Consultant has successfully gone live for customer in specified time or a developer has build such an amazing bug-free product that a company started earning in millions.

Framing of BIG picture

Founder should never lose sight of their goals to achieve in a defined time frame. Developing compensation strategies is all about nurturing your team. You can reduce the risk and can retain employees by signing a bonus or an annual bonus with the employee. If employee leaves, they will be leaving all the cash reimbursement that they owe.

Consider a situation where your talented employee asked you to increase the base salary as per the market value. A wise founder will not just dismiss the idea or jump to an equity/accept paper solution, he will evaluate the employee’s performance and offer various compensation accordingly.

Recruit with promoted Job titles

Not only money fascinates to employees, Job title too plays a vital role in switching a job. Provide a designation that’s one steps up from their last title. This job description will not make a major change in your organization but for that employee it will make a big difference. It will help that employee in his dynamic and fast-growing career.

Flexible and balanced culture

One more positive strategy that can be implemented is to provide balanced and flexible work life. Offer flexi time, leave policies, long uninterrupted vacations, work from home facilities, short Friday’s and fun gaming activities. This culture attracts the employees as they feel free bird with no terms and regulations.

This kind of compensation structure do help in reduction of fixed salary cost for an organization and at the same time meet employee’s need as well. A young lady can work from home taking care of her 2-year old sick child.

Extra Perks

Offering the extra perks like metro passes, gym membership, shopping coupons, food coupons, parking, occasional team parties – adds up the cost for an employee. For example, paying for the parking space expenses from your corporate account will surely make your employees happy. Also, this will help you out in your taxes as well.

Employees tend to join this culture adapted organizations as they like extra perks, incentive and work-life-balanced.

Final Verdict

It might seem like the least vital thing to do but compensation structures will eventually affect your most treasured asset in your business – employees.

And the way to your start-up success is to keep them encouraged. That starts with a right and fair salary framework. Engage your employees with compensation and benefits so that they do not turn out to be frustrated and disappointed employee.

These compensation plans will help in retaining talent and attract to on-board more.

Copyright @ PayReview 2024. Evoque Advisory Private Limited is a company registered in India operating under brand name PayReview.