You’re a tiny startup with big ideas, big plans, and a very limited budget. You’re also launching the firm with partners at your side who can make business decisions but don’t know a single thing about engineering. To get your company off the ground, you need an engineer who can wear multiple hats, innovate, demonstrate flexibility in the face of daily challenges, and possibly work long, unconventional hours. And you need one soon. But you can’t pay enough to compete for top talent with larger and longer-established firms. So what can you offer instead? Consider the following.
Attract Top Engineering Talent on a Budget
First, no matter what your compensation plan looks like, you’ll need to get a smart, energetic and hardworking engineer excited about your company. You’ve probably already worked hard to attract investors; consider crafting a similar pitch for potential employees. Think first: What intangible benefits does the employee stand to gain by signing on with you now? And don’t neglect the reverse argument. What does she stand to lose by passing up this opportunity?
Next, evaluate your options in terms of stock offerings. If you decide to offer common stock to a new employee, you may expose yourself to problems with securities laws. You may also be creating tax liability issues for the employee and you’ll probably be required to withhold taxes as you would for any other form of compensation. If you have great tax lawyers, you’ll have an easier time navigating these issues. But in the long run, common stock may not be the best solution for the employee or for you.
Instead, consider placing the employee on a vesting schedule with options that increase every few years as the employee remains with the company. Make sure you have your vesting program reviewed by a legal team before you draft a formal offer.
Finally, when you do decide to put your formal offer in writing, make sure the agreement is “at-will” and doesn’t bind the employee to you or you to her in any way. She’ll already be taking a risk by signing on with you, so don’t push your luck. And in case the relationship doesn’t work out, you’ll want to be able to terminate her employment at any time, for any reason.
An additional note: some companies are tempted to offer young engineers “sweat equity” in lieu of actual payment. This is a mistake (and is illegal in many states). You’ll need to pay your employees minimum wage, at the very least. If you can’t afford to do this, you aren’t yet ready to launch your business.
For more guidance on attracting and retaining promising engineers, arrange a consultation with the Little Rock, AR staffing experts at CSS.