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Chapter 4. Employee Recruitment and Comp... > Employee Compensation in the Technol...

Employee Compensation in the Technology Segments

Introduction

One of the main objectives of companies in general, and startups in particular, is to navigate the company to a path of rapid growth that will enhance its profits and establish its financial stability. Since the development of products is based primarily on the human factor, the recruitment of talented employees and enhancing their bonding with the company are crucial elements on the road to the company's success. As in any field, companies, including startups, also seek to compensate their employees in order to bring out the best in them: industriousness, identification, loyalty, etc. The special nature of start-ups in the high tech industry sheds light on the unique trend created over the years to compensate employees in a different manner from that customary in other industries. In order to understand the different nature of such compensation, it is necessary to understand the unique environment in which startups operate, which creates different emphases in the compensation structure:

  • Startups are usually not as cash-affluent as are established companies, and therefore find it hard to compensate managers at the levels customary in established companies. They make up for this by the generous granting of options in the company. Such options could turn out to be highly valuable if they succeed—maybe even more so than in established companies. Furthermore, by linking the remuneration with a salary and options that are vested over a period of time, the companies associate their success with the employee's remuneration to one degree or another, thus increasing his or her involvement and identification with the company.

  • High tech employees are relatively well-educated and have high expectations. Therefore, it is natural for startups to give their employees generous social benefits and other indirect benefits, often much more than in more mature companies.


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