We need to rethink employee compensation • Hacker News Board

Re: We need to rethink employee compensation

#381

Post by walshemj » Thu, Jun 25, 2015, 10:13 AM UTC

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.

What does the base rate have to do with it now you don't have to buy an annuity.

And saving tax now at 40-50% and only paying standard rate later is a no brainer and if you can do it via salary sacrifice and get some or all of the NI added to the pensions

Re: We need to rethink employee compensation

#382

Post by batou » Thu, Jun 25, 2015, 10:37 AM UTC

walshemj wrote: post #381

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.

What does the base rate have to do with it now you don't have to buy an annuity. And saving tax now at 40-50% and only paying standard rate later is a no brainer and if you can do it via salary sacrifice and get some or all of the NI added to the pensions

If the base rate was higher then property would be a lesser investment.

It's entirely crazy. I just asked for more cash and chucked the money on the commodities market. My portfolio is worth 178% what it was 12 months ago. Sod tax. Sod pensions.

That cash goes into house. That house I live in. Better interest rate. Sell when the kids have moved out. Live off cash, dumping bits of it in various other investments to avoid inheritance tax in the future.

Re: We need to rethink employee compensation

#383

Post by jackgavigan » Thu, Jun 25, 2015, 12:06 PM UTC

pjc50 wrote: post #275

jackgavigan wrote: post #169

Earlier quoted context omitted.

> ..prohibited from selling... That would be a Big Red Flag for me.

It's the norm for share options. You can't sell them or even in many cases keep them after you quit the company. It's a very circumscribed deal.

"Everyone else does it this way" isn't a good enough reason for me.

Re: We need to rethink employee compensation

#384

Post by Akkuma » Thu, Jun 25, 2015, 1:12 PM UTC

ryan90 wrote: post #326

Akkuma wrote: post #309

Earlier quoted context omitted.

I just had an offer that had, depending on chosen comp .1% to .17% equity with a 10k loss in salary all for an extra .07%. By the way, they have a lot of convertible notes and are pre-series A. I turned around with a counter offer/request that pointed out the equity is largely worthless with no anti-dilution provisions, while seemingly gearing up for a heavy dilution.

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.

Maybe I don't properly understand equity, but if two founders each take 20%, an employee pool is created with 10%, the convertible notes eat another 20%, and the seed ate 20%, this leaves 10% of shares available. How are you only going to take dilution if it increases your employees existing share value if you need funding to survive and have very little shares to give up leading into a series A?

Re: We need to rethink employee compensation

#385

Post by ryan90 » Thu, Jun 25, 2015, 1:35 PM UTC

Akkuma wrote: post #384

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.

Maybe I don't properly understand equity, but if two founders each take 20%, an employee pool is created with 10%, the convertible notes eat another 20%, and the seed ate 20%, this leaves 10% of shares available. How are you only going to take dilution if it increases your employees existing share value if you need funding to survive and have very little shares to give up leading into a series A?

You do not properly understand equity.

If I'm a founder and I own 100% then give up half the company to investors, that 50% I give up better improve my overall outcome by at least 2x. Usually that's reflected in the overall valuation.

http://paulgraham.com/equity.html

Re: We need to rethink employee compensation

#386

Post by ryan90 » Thu, Jun 25, 2015, 1:38 PM UTC

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?

What is better, owning 1% of a $1mm company or 0.5% of a $5mm company? That's why you shouldn't worry about dilution.

Re: We need to rethink employee compensation

#387

Post by whitneyrzoller » Thu, Jun 25, 2015, 1:50 PM UTC

branchless wrote: post #64

drivingmenuts wrote: post #5

Earlier quoted context omitted.

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.

> I tend to think of options as worthless That's why they are trying to pay you with them. For them it's a one-way bet. It's sadly just another case of pushing risk onto the worker and not really passing on much of the upside.

I have a friend who was ridiculed by a founder recently for not understanding the concept of equity.

She had rejected his salary + equity offer which was a %50 salary cut from her current position.

Irrespective of what the equity portion was I thought the founder's response was disgusting and pretty much validated her decision to pass.

Re: We need to rethink employee compensation

#388

Post by JoeAltmaier » Thu, Jun 25, 2015, 1:52 PM UTC

whitneyrzoller wrote: post #387

branchless wrote: post #64

Earlier quoted context omitted.

> I tend to think of options as worthless That's why they are trying to pay you with them. For them it's a one-way bet. It's sadly just another case of pushing risk onto the worker and not really passing on much of the upside.

I have a friend who was ridiculed by a founder recently for not understanding the concept of equity. She had rejected his salary + equity offer which was a %50 salary cut from her current position. Irrespective of what the equity portion was I thought the founder's response was disgusting and pretty much validated her decision to pass.

I think is endemic to founders that they think this way. Else they'd not be founders.

Re: We need to rethink employee compensation

#389

Post by harryh » Thu, Jun 25, 2015, 2:06 PM UTC

s73v3r wrote: post #344

harryh wrote: post #101

Earlier quoted context omitted.

That is certainly one point of view. And if one person leaves it's not likely to materially affect the business as everyone else keeps it going. Another point of view is that if all the early employees disappear at the 4 year mark (or whenever they feel they've vested "enough") that could cause very serious problems for the business. There is an element of a prisoner's dilemma here and it's not unreasonable to think…

It's not complicated. If the company is that bad that people want to leave as soon as they're vested, then the company deserves to fail.

So you think the managers should just look around, say "yup, we deserve to fail" and give up?

No. That's not the way it works.

Re: We need to rethink employee compensation

#390

Post by eli_gottlieb » Thu, Jun 25, 2015, 2:16 PM UTC

s73v3r wrote: post #337

tptacek wrote: post #202

Earlier quoted context omitted.

Here's the ground truth: if you build a company with someone else's money, they're going to get a huge chunk of the upside, and the original management is going to retain control only as long as they hit their numbers. Hopefully, nobody is saying employees shouldn't be wary of VC funded companies. They definitely should.

Why? When did simply having money become more valuable than actually doing the work?

Since the beginnings of capitalism, duh.