Why Give Equity to Employees

Why Give Equity to Employees

December 22, 2023 by investor

Why Give Equity to Employees

Employees are a key factor in the success of startups.

Here’s a list of reasons why you should give equity to employees:

Recruiting — the market is competitive, especially for quality candidates.

A startup offering equity to employees will find it a competitive advantage over other companies.

Retention — equity vested over time is a useful tool for retaining employees.

The employee must work a certain number of years before their shares vest.

This is a key factor in building a stable workforce.

Motivation — employees who have an ownership interest in the company are more motivated than those who do not.

Tax benefits for the employee — equity compensation is taxed at long-term gains rather than ordinary income rates that apply to payroll.

Tax benefits for the employer — there’s no income tax cost to the company.

Consider these benefits in setting up an equity compensation plan for your startup.


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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.