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We need to rethink employee compensation

aaronkharris.com

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Re: We need to rethink employee compensation

#371

Post by batou »

dogma1138 wrote: post #263
walshemj wrote: post #251

Earlier quoted context omitted.

Err no the UK used to have very good pensions schemes. BT has a FS scheme unfortunetly now closed to new entrants and its DC pension matches up to 8 or 10% The shares you get from share saves are real shares none of this multiple share lasses with different voting powers. And I certainly get the divi from mine. And yes this years BT is a v good one. And I did 400% roi from my REL shares a couple of years back and you…

I think you are confusing state pension with employer pensions, employer pension contribution are only now being mandated by law, and most companies which use PAYE and are under 50 employees still do not have to do it, the dead line now is 2018 but it's been pushed back all the time. The shares you got from Sharesave would be "real" shares only if you bought them at the end of the maturation period if you cashed out…

That's because the options for mandatory pensions are:

1. High risk fund backed pension. Probably will decline in value due to fund saturation.

2. Low risk fund backed pension. You pay more in yearly fees and decline in value.

I killed mine dead. Stupid idea.

If base rate was higher, perhaps but its a stupid stupid idea now.

Re: We need to rethink employee compensation

#372

Post by rsamvit »

probablycorey wrote: post #334

Has anyone used a service like https://www.equidateinc.com . They help you "sell" the right to buy your stock options to a third party. From their site: > Traditional stock sales are time consuming, expensive, and clutter a company's cap table. Now it's easier: the Equidate contract transfers the economic upside and downside of your shares without actually selling them. It honors all exisiting transfer restrictions o…

Equidate founder here! Feel free to email me directly at samvit@.. if you have any questions

Re: We need to rethink employee compensation

#373

Post by walshemj »

batou wrote: post #371
dogma1138 wrote: post #263

Earlier quoted context omitted.

I think you are confusing state pension with employer pensions, employer pension contribution are only now being mandated by law, and most companies which use PAYE and are under 50 employees still do not have to do it, the dead line now is 2018 but it's been pushed back all the time. The shares you got from Sharesave would be "real" shares only if you bought them at the end of the maturation period if you cashed out…

That's because the options for mandatory pensions are: 1. High risk fund backed pension. Probably will decline in value due to fund saturation. 2. Low risk fund backed pension. You pay more in yearly fees and decline in value. I killed mine dead. Stupid idea. If base rate was higher, perhaps but its a stupid stupid idea now.

You do know that in the UK you get a massive boost via tax relief to your contributions for pension contributions

Re: We need to rethink employee compensation

#374

Post by walshemj »

dogma1138 wrote: post #263
walshemj wrote: post #251

Earlier quoted context omitted.

Err no the UK used to have very good pensions schemes. BT has a FS scheme unfortunetly now closed to new entrants and its DC pension matches up to 8 or 10% The shares you get from share saves are real shares none of this multiple share lasses with different voting powers. And I certainly get the divi from mine. And yes this years BT is a v good one. And I did 400% roi from my REL shares a couple of years back and you…

I think you are confusing state pension with employer pensions, employer pension contribution are only now being mandated by law, and most companies which use PAYE and are under 50 employees still do not have to do it, the dead line now is 2018 but it's been pushed back all the time. The shares you got from Sharesave would be "real" shares only if you bought them at the end of the maturation period if you cashed out…

how is it not? you get options that you can exercise at some point in the future - you have to pay to exercise options in the USA.

The main differences are that for approved schemes HMRC doesn't screw you like the IRS does and if you leave early you can exercise your options and the is far less chance of being diluted.

Re: We need to rethink employee compensation

#375

Post by deciplex »

ryan90 wrote: post #327
mpdehaan2 wrote: post #7

Earlier quoted context omitted.

This. It seems that it's acceptable in tech culture to use "you have too much stock" a reason to even underpay founders. This is busted logic, as the company could explode at any time, not to the fault of anyone in particular (but sometimes yes). So far, I think I've been in 3 decent startups that all of which failed and do not exist anymore. None of them exited cleanly. Some might, but you might not want to stick it…

Stock is not free. Equity is expensive if you're working for a good company. As a founder I would much rather pay out cash , but that's generally not what people are after (esp director, vp level)

I stopped taking options given away by startups seriously on November 10, 2011 [1]. Maybe stock is not "free", but employees should discount the nominal value a lot more than they seem to. What's a good ratio, as a rule of thumb? 1:10? 1:100?

At any rate, employees should not take them seriously in comp negotiations until they are well into FU money territory, should they ever pay out at a reasonable valuation after accounting for underhanded shit like excessive dilution and claw-backs.

[1] https://news.ycombinator.com/item?id=3218774

Re: We need to rethink employee compensation

#376

Post by batou »

walshemj wrote: post #373
batou wrote: post #371

Earlier quoted context omitted.

That's because the options for mandatory pensions are: 1. High risk fund backed pension. Probably will decline in value due to fund saturation. 2. Low risk fund backed pension. You pay more in yearly fees and decline in value. I killed mine dead. Stupid idea. If base rate was higher, perhaps but its a stupid stupid idea now.

You do know that in the UK you get a massive boost via tax relief to your contributions for pension contributions

Yes. I work in the finance sector and deal directly with the providers that sell this shit ironically.

The tax relief was nullified instantly by the discussion with my employers that sort of went "give me another £10k or I go work somewhere else".

Meh.

I don't actually have a problem paying tax. I've learned to consider my income after tax, not before. Maximising the difference is easier through getting the initial captial larger than it is reducing the difference and doing the associated paperwork (and periodically getting buggered by HMRC). I can still move up another £30k if I want to but the current place is convenient.

Re: We need to rethink employee compensation

#377

Post by throwaway6497 »

s73v3r wrote: post #335
ryan90 wrote: post #326

Earlier quoted context omitted.

Founders don't take dilution unless it makes each existing share more valuable. Unless it's a down round of course. Dilution is life; just accept it. No employee or founder stock will ever have an anti-dilution provision.

Why? Why do we, arguably the part of the startup that is responsible for the valuation, have to accept that?

The skeptic in me makes me think - because VC's set the rules mostly as they are the one who provide capital; They do wan't to make sure they get the most out of their investment with best possible terms.

Re: We need to rethink employee compensation

#378

Post by dogma1138 »

walshemj wrote: post #374
dogma1138 wrote: post #263

Earlier quoted context omitted.

I think you are confusing state pension with employer pensions, employer pension contribution are only now being mandated by law, and most companies which use PAYE and are under 50 employees still do not have to do it, the dead line now is 2018 but it's been pushed back all the time. The shares you got from Sharesave would be "real" shares only if you bought them at the end of the maturation period if you cashed out…

how is it not? you get options that you can exercise at some point in the future - you have to pay to exercise options in the USA. The main differences are that for approved schemes HMRC doesn't screw you like the IRS does and if you leave early you can exercise your options and the is far less chance of being diluted.

The UK has an allowance for a company option plan which allows employees to buy stock also. Save As You Earn is different, you get options, but you don't buy in for them directly.

SAYE allows the employer to deduct upto 225 GBP a month (pre tax) from the employees salary and put it into an investment scheme that ties that money into a share options plan.

The shares have a set value at the entry into the scheme and the company "allocates" an amount of shares based on the end savings projects for that period.

At the end of the period when the options mature you can decide to cash out get your "deposit" + a proportional revenue from the shares maturation value, or to buy out the option at the set price and own the shares fully.

The payout out, the control over the stock, and some other factors are quite different than just a simply option scheme when a company allows employees to buy option/shares or gives it to them as pure compensation.

Basically the best way to describe SAYE is like an ISA/401K but one which the employer controls, and also greatly benefits from.

Now don't get me wrong SAYE schemes especially for low paid employees in freshly privatized organizations can yield good payouts, not always, but they usually do especially when the organizations are too big to fail like BT. It also allows companies in industries which are barred from regular employee share/options like banks for example to grant employees a share investment plan. But it's not some magic nifty employee empowerment plan, it's much more beneficial to most employers than it is to employees.

Re: We need to rethink employee compensation

#379

Post by campers »

drivingmenuts wrote: post #5
Jemaclus wrote: post #3

In this market, I tend to think of options as incentives, and not as replacements for salary. Salary gets me in the door and work hard, great people and culture make me want to be there and evangelize, and options incentivize me to work my ass off. (I'd work my ass off without options, but the options really make it easy to say "I will do everything in my power to make this succeed" instead of "I'd rather go spend ti…

I tend to think of options as worthless, until they vest. Which is too far in the future to count on. Pay me money. That's actually useful.

Agree. Also the return on the options should also be compared to a risk-free/conservative rate from the additional savings from the higher salary.

In somewhere with a high cost of living like SV increases in pay can significantly increase what you can save each year.

Say you take a $100k offer and equity compared to a $120k salary offer. Now lets say on $100k you save $10k year, and if you're on $120k between tax and a bit of extra spending you save $20k.

You've doubled your savings which you can put towards other investments. In this example its another $10k/year you could put into an investment property, stocks or whatever.

Or just go to Vegas each year and play a game of roulette.

Re: We need to rethink employee compensation

#380

Post by walshemj »

dogma1138 wrote: post #378
walshemj wrote: post #374

Earlier quoted context omitted.

how is it not? you get options that you can exercise at some point in the future - you have to pay to exercise options in the USA. The main differences are that for approved schemes HMRC doesn't screw you like the IRS does and if you leave early you can exercise your options and the is far less chance of being diluted.

The UK has an allowance for a company option plan which allows employees to buy stock also. Save As You Earn is different, you get options, but you don't buy in for them directly. SAYE allows the employer to deduct upto 225 GBP a month (pre tax) from the employees salary and put it into an investment scheme that ties that money into a share options plan. The shares have a set value at the entry into the scheme and th…

How are unvested and unexercised options in the USA any different to share save? you don't get the dividends until you vest and you cant vote them until they vest.

And BT does have other share schemes I know as my PM got some as a bonus for his work for the millennium dome - these tend to be kept quiet in fact my pm though it was a joke by some of v senior mates

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