• How-to

A competitive compensation package will make your startup a hot place to work in.

Salary
The base salary has to be in line with the market vis-a-vis small to mid-sized firms and the job role. Each case also depends on where you hire people from, be it a top engineering college, B-school or someone already in the industry. In India, it’s easy to find out what others are paying. Your personal and professional network should be helpful in this regard. Else, senior people in the HR industry and your advisors are good sources to gauge the industry averages.

The hygiene element
Provident Fund, medical allowance and insurance come under this category of compensation. This is especially important if you are hiring entry level people. Once your staff strength touches 20, you are compulsorily required to contribute to Provident Fund. Since you may not start with 20 employees, it’s important for you to keep aside money for this purpose and offer it when you become eligible. Mention this to any person you hire as future compensation. Medical allowance is usually given as a reimbursement.

Variable pay
Always keep aside one portion of your budget for variable pay as a performance-based incentive. This would be defined as any payment that is not linked to continuous payment. The variable pay can be in the form of cash-bonuses, stock options or profit-sharing. For startups, it is advisable to keep this component as high as possible, since you will not be able to offer extravagant salaries. Startups have little room for non-performers, and it is important to let employees feel they are part of the value creation of a company. The metrics for this component are usually decided by employers on their own and could be linked to productivity, quality, teamwork, profitability, loyalty; basically anything you consider important to the growth of your business.

Perks for mid-senior management
People at this rank will attract higher salaries, meaning higher taxes as well. Components like house rent, LTA, car allowance benefit them on the tax front, so it’s good to factor them into the compensation package. Also, make sure they get a higher proportion of variable pay.

Give enough leave
It is true that time is money, but your employees need a power-break as well. Leave structure is an important component of a good compensation package. Follow the industry practice, but be as flexible as possible.

Grant leave to employees as and when they require it and try not to be stringent on how much and when, irrespective of rank. Remember, as a startup you will not be able to match salaries of MNCs, so here is where you can compensate. These intangibles are definitely the hidden gems inside a package.

©Entrepreneur July 2010

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compensation, package, perks, salary, startup