When your staff feels like family, it’s only natural that you would want to get them more involved with your business. After all, employees who feel vested in your company are more likely to work hard!
One way to involve them more is to offer equity to employees. Here we’ll look at whether it’s a good fit for your business.
Why Offer Equity
When you first start a business, your company’s success relies completely on you. But as it grows, you come to rely on others to help you grow your business. Offering equity is one way to show your appreciation for the people who work so hard for you every day.
But the benefits go beyond that. Many companies use equity as an employee perk to save money. If you offer slightly less in salary, but offer some great stock options, an employee has the potential to make more than they would with just the salary.
How Should You Decide Who Receives the Offer of Equity
At CorpNet, we offer equity to key employees in executive positions. So there’s some incentive to work hard and build time for our company to qualify for equity.
It’s up to you who you offer equity to, but probably you don’t want to offer it to part-time employees or anyone in a role that sees high turnover. Making equity a perk that comes, for example, at the manager level, can inspire other employees to work hard so that they’ll get promoted to manager and take advantage of the equity option.
Get Your Legal Ducks in a Row
You’re dealing with a lot of legal issues when it comes to offering equity, so start by making sure to build in an equity grant in your employee agreement. It should cover:
- What percentage of stock you’re offering
- The exercise price
- The vesting period
- What happens to the stock if the employee is terminated
- How long the employee has to exercise the options after leaving your company
When is the Right Time to Offer Equity to Employees?
If your company is going through a big spurt of growth, or you’re looking to be more competitive in your offering to new hires, it could be the ideal time to consider offering equity to employees.
If, on the other hand, you’re struggling, offering worthless stock isn’t going to do anyone any good.
If you see equity as a way to raise the bar on your employee performance, and overall help you grow your company, give it a shot.