How To Give Equity to Employees

How To Give Equity to Employees

December 21, 2023 by investor

How To Give Equity to Employees

Equity is an important compensation tool for employees.

Startups that don’t provide equity must provide all compensation from the cash flow in the form of salaries and bonuses.

This can be difficult on the finances of the business.

Equity compensation doesn’t require any cash outlay.

Consider these methods of compensating employees with equity:

New employees — give equity as part of the compensation package and pay market rates.

Promoted employees — give equity as part of the higher compensation package.

Performance compensation — give equity as part of the compensation for outstanding performance.

Ongoing compensation — provide annual distribution of equity to employees to create a ladder of vested shares. 

Avoid big gaps in the equity compensation so there’s a steady flow of vested shares coming up each year.

The market is competitive and equity compensation is a key factor for many employees.


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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.