Compensation Policy for Startups and Scale-ups:   Key to Success

Startups and scale-ups often begin with basic rewards such as starting salaries, commuting allowances, career budgets and sometimes retirement plans. Yet many of these companies lack a strategic compensation policy. They often look at the competition without a thoughtful approach to their own compensation structure.

Rewarding as a Motivator and Method of Distribution

Reward can be a powerful tool for motivation, engagement and performance improvement. In larger companies, reward is part of an integrated HR strategy, but in smaller companies, such as startups, it is often a distribution method. It is important that startups use rewards not only to attract and retain talent, but also to encourage intrinsic motivation and promote job satisfaction.

The 3 Keys to Work Happiness

According to Daniel Pink in his book Drive, the three keys to work happiness are autonomy, mastery and meaning. Startups can differentiate themselves by giving employees the freedom to grow, supporting their development and ensuring a clear mission that contributes to societal goals.

Employee Participation as a Reward Tool

Employee participation can be a valuable reward tool for growing companies. It helps with talent retention, increases loyalty and allows employees to benefit from the company’s growth. A properly implemented employee share plan can lead to positive results, but requires careful alignment of four components:

1. Strategy & Policy: How does employee participation fit within the company’s strategy and culture?
2. Technology: How are the ground rules and value of participation established? Are the rules clear and administratively feasible?
3. Financial: How is the value of the company and shares determined? What are the implications for employees?
4. Communication & HR: How is the plan presented to employees? Is the communication clear and supportive?

When implementing employee share ownership, there are a few considerations to keep in mind:

Target group: Who is eligible to participate? This can affect motivation and expectations within the company.
Expectations: What do employees expect from their participation? Is there a need for control or influence?
Conditions: How are claim rights and exit strategies regulated?
Valuation: How transparent is the valuation of the company and shares? What happens when changes such as sales or disability occur?
Risks: What are the risks of price and value differences?

A well-thought-out employee participation plan can be a powerful tool to motivate and engage startups and scale-ups, if carefully designed and implemented.

Interested?   Let us know and contact Eissens HR & Legal