Equity Incentive Plan for Employees

Recruiting talent was a big topic at this year’s Vancouver Startup Week. Providing employee stock options is one way to attract great people to your company and can be a powerful incentive that rewards retention and drives performance and loyalty.I sat in on Faskin Martineau’s talk on Equity Incentives for Employees, and thought I’d share some tips for getting your incentives plan off the ground.The first thing you’ll need to be clear on is what you want to promote in your team and how. Perhaps you want to reward retention, or encourage high levels of performance. Similarly, think about whether you want to give your team a sense of ownership in the company to enhance loyalty. Don’t underestimate the benefits of consulting with your team throughout this process. They’ll be an unbeatable resource when it comes to telling you how they want to be motivated and recognised.Next, you’ll need to decide is how you want to structure your incentives plan. There’s more than one way do this. Here’s the five most popular: 

1.     Stock Options

2.     Restricted stock or restricted stock units (RSUs)

3.     Stock appreciation rights (SARs)

4.     Phantom stock, and

5.     Employee stock purchase plans (ESPPs)

Once you are clear on how you want to structure your equity options, you can start fleshing out your incentives plan in more detail. Think about who should be eligible for stock options in the company, and at what point those options will come into force. Will options be available to new hires as they come in? Or will they vest periodically throughout their time with the company?Finally, make sure you have resources at your team’s disposal so that they can understand your offer and how to make use of it. You should also give your team the opportunity to compare their option to industry standards for employee ownership levels.If you want to know more about building employee incentives plans, get in touch! Photo credit.