Investors, business partners, and stakeholders are increasingly looking for startups with strong teams that are motivated and aligned with the company’s vision. However, for startups, competing with established companies on salaries can be difficult which means one has to explore other forms of remuneration to attract and retain top talent. A comprehensive compensation package that goes beyond salary benefits can make a big difference in attracting and retaining top talent, while showing a sustainable compensation strategy to potential investors for your business.
Here are some differences that non-salary remuneration options can make in a business.
- Help you attract top talent: Talented and often senior professionals are also looking for opportunities to grow their careers, earn respect and make a difference. By offering a variety of non-salary benefits, you can show potential employees that you’re serious about investing in their development and well-being.
- Improve employee engagement: Employees who feel valued and appreciated are more likely to be engaged in their work which can lead to increased productivity, morale, and loyalty.
- Cost-effective: Some non-salary benefits can be very cost-effective for startups. Options such as flexible work arrangements can save you money on office space. Other benefits, such as professional development opportunities, can be relatively inexpensive to provide.
Types of non-salary benefits for employees
There are many different types of non-salary remuneration that you can offer to your employees. We’ll zoom in on 5 of the most common options.
- Equity: This gives employees a stake in the ownership of the company, which can be a powerful motivator. It’s often offered in the form of stock options.
- Profit sharing: This allows employees to receive a portion of the company’s profits. It’s a great way to reward employees for their contributions and align their interests with the company’s success.
- Employee bonuses: Bonuses can be a great way to reward employees for their hard work and achievements. They can be based on individual performance, company performance, or a combination of both.
- Stock options: Stock options give employees the right to buy shares of company stock at a predetermined price in the future. This can be a great way to give employees a chance to benefit from the company’s growth.
- Benefits: There are a wide variety of benefits that you can offer to your employees, such as health insurance, pension, disability insurance, paid time off, child care, social events and commuter allowances.
How to decide which non-salary options to offer your employees
The best non-salary remuneration options for your startup will depend on a number of factors, such as your budget, your company culture, the needs of your employees and if preparing for fundraising, investor expectations. However, here are some considerations to make before you take a decision:
- Your company’s growth stage: Startups at different stages of growth will have different needs. Early-stage startups could focus on equity and other forms of ownership, while later-stage startups may offer more traditional benefits and performance-based incentives.
- Your company culture: The non-salary remuneration options that you offer should reflect your company culture. For example, if you have a casual company culture, you may want to offer flexible work arrangements or social events where team members can bond with each other.
- Market competitiveness: Do some research into market trends and your industry benchmarks to ensure your non-salary remuneration package is competitive and attracts top talent. Find out what others are doing and mirror according to your capacity.
- Investor expectations: Understand your investors’ preferences and expectations regarding compensation. Some investors may have specific requirements or preferences regarding equity grants or other forms of non-salary remuneration.
Showing that you have a strong and motivated team can positively influence investor decision making. A well-structured remuneration package not only helps you attract and keep top talent but also shows that your recruitment strategy is sustainable and investor-friendly.
To learn more about effective team-growth strategies we encourage you to enroll in the VC4A Startup Academy course, “Start your Business“. This module provides valuable insights and practical guidance for founders looking to build high-performing teams. For more direct advice, you can also connect with an expert on the VC4A Mentorship Marketplace, if you sort by topic.