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I am hiring my first employee (a developer) for my startup and I am planning out the benefits. So far I’ve figured out the health insurance aspect. As a self-funded entity, I can’t afford much (about $60-72k for a frontend engineer — I’m a backend / cloud engineer), so I want to offer other meaningful benefits to compensate.

I am wondering what kind of benefits to offer. I thought about stock options to give, if that’s a good idea. I want to build a great team eventually and I want them to feel that they truly belong here. How many shares / percent should I give? What would the vesting schedule look like?

I also thought about PTO, 401k, continued education etc but I don’t know if I can afford all of this. I can probably offer 2 weeks of PTO, but not sure about the others.

What other benefits should I give my first employee / team member, under the constraint of a limited budget, as I want to build a nurturing, growth-oriented environment but I’m limited right now in what I can offer? Apart from a great vision, what would make you want to work at a startup?

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    Is the salary you listed competitive on the market?
    – Aida Paul
    Jun 29, 2020 at 21:23
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    Not a downvoter, but I don't consider this question on topic here; it's not really formulated in such a way as can be answered generally, and is too company specific to be answerable here (as well as really opinion-oriented). Perhaps "what benefits are essential required benefits to give to an employee" could be, but even that feels squishy and too dependent on the field.
    – Joe
    Jun 29, 2020 at 22:45
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    Telling us your country and state can help. Some paces require insurance, sick leave, and vacation. Jun 29, 2020 at 23:28
  • Have you considered offering partnership? If you can't pay a market salary now, the only real hope is to offer someone the chance of the future fruits of the business and to find someone who shares that vision. Expecting to hire employees when you can't afford them is the height of pretension.
    – Steve
    Jun 30, 2020 at 16:37
  • This really needs a location tag. I would think what benefits are customary to offer would heavily depend on where you are (for example, health insurance doesn't need to be provided by the employer in most countries that aren't the US)
    – Seth R
    Oct 26, 2022 at 16:03

5 Answers 5

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  • Buy pizza often and say that we are family, we gonna pick that low hanging fruit and will change the world
  • 5% discount card for gas for going extra mile
  • Give sound title like VP of UX, make feel important
  • Involve in making decisions, strategy, hiring
  • Give freedom of self expression, choose tools and technologies, set standards
  • Incremental vesting plan, more equity with every year stayed in the company
  • Cover hair transplant expenses if employee loses hair while working in your startup
  • Let work from anywhere. Consider remote company style, your salary range could be more attractive in other countries
  • If not remote, dedicate separate room with solid chair (massage), table and enough privacy
  • Create company culture and story - you need to target specific personality types, like-minded individuals who would be motivated and suitable for the company
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Paid time off is the easiest to offer, as it costs you nothing above the budgeted annual salary.

You're obviously in the USA. In the UK 28 days (5.6 weeks) is the minimum legal holiday entitlement for a full time employee.

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  • But that 28 days can include public holidays. gov.uk/holiday-entitlement-rights
    – Simon B
    Jun 30, 2020 at 19:35
  • Not exactly true; paid time off for salaried staff costs you the work they would have performed had they been "on the clock". Granted, taking occasional breaks from work helps keep people productive and energetic, so it's hard to measure.
    – spuck
    Jul 1, 2020 at 16:17
  • @SimonB This is true. You either get public holidays off or you're given a bookable day instead if your role means you have to work that day. I would say though that UK leave (unlike PTO in the US) doesn't include sick days. So for example I currently have 30 days leave and 20 paid sick days in my contact. Generally I don't get ill very often but last year I had a bad accident and was off for 15. I still had my full allocation of leave to use when I returned.
    – Dustybin80
    Oct 26, 2022 at 14:28
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If you took the difference between the market rate for what you want and what you would pay (salary + tangible benefits) that's essentially what you're asking them to invest in your business. What would you give to a VC who would invest that every year?

I'm not saying that's what you're going to offer. It's a negotiation, and tbh start-up employees can be a lot more naïve than VC people. And it's pretty obvious that while VCs are after only equity, an employee may accept something like leadership experience, relevant mentoring etc as part of their compensation.

But I think the best place to start is by at least knowing what the investment they're making would be worth to you if you had to get it via some other channel.

Once I knew that, I'd start looking at what I could offer and try to estimate what that would be worth to people. 401k, base salary, culture, time off etc. But I'd encourage you to also think of something you're in a uniquely competitive position to offer. I'll share one I've thought of: you're in a unique position to mentor a future entrepreneur someone though the process of starting a software business.

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The bottom line is you need to offer whatever it takes to retain talent. As the saying goes, "you get what you pay for": If your salary/benefits/equity offered is only enough to retain a low-quality developer who just needs "any job", then that's what you will get. If your package is enough to only hire a junior developer, that's what you will get.

So basically, you need to be competitive with the market. Without a location tag or location description in the post, it's hard to know what is "competitive" in your locale. If you are in North America, my guess is $60-72K is not enough, and 2 weeks PTO is not enough. If you want an idea of what is "enough" (market data might not be helpful because if you're in SF you probably can't afford $200K to compete with Google), here's a rough guideline:

  1. Take the median rent for an apartment in your area for someone in the age/experience bracket you're targeting (e.g. for a junior dev, then a single apartment is probably fine; for a senior dev then maybe a 2LDK, for a principal, then maybe a house).

  2. Multiply that number by 3, because the rule of thumb is you shouldn't pay more than 1/3 of your income on rent.

  3. Multiply that number by the tax rate your employee will pay. You'll have to reverse-engineer the tax rate from the net income.

That number you get is the minimum amount you should pay your employee, not including other benefits and equity. Start there, and see if you can even afford to hire an employee. If you can't, then maybe you need to get some sales or VC before you think of expanding.

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Typically startups offer equity to make up for the lack of benefits. The idea being "We'll rough it out for a couple of years, then get paid big when we go public"

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    The trouble with shares (or share options) in a start-up is that they are like lottery tickets. There's a high chance that they will turn out to be worthless, a moderate chance that you'll make a modest profit, and a very small chance they will make you fabulously wealthy. They don't really make up for a lousy salary or benefits.
    – Simon B
    Oct 26, 2022 at 22:33

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