The following is an edited excerpt from Startup Money Made Easy: The Inc. Guide to Every Financial Question About Starting, Running, and Growing Your Business (HarperCollins Leadership), by Inc. editor-at-large Maria Aspan, who will be discussing her book on Tuesday at Inc.'s Fast Growth Chicago event.
Creating jobs. Paying salaries and/or hiring contractors. Retaining, promoting, and giving raises to employees. Providing health insurance, retirement plans, paid vacation and family leave, and all the perks you can afford.
These are just some of the practicalities--and expenses--of growing your business beyond the early startup days. Hiring more employees is a crucial part of most growing businesses' success. So if you want to maintain your growth, you'll need to ensure that your workers feel fairly compensated.
The good and bad news is that employee compensation isn't just about money. (It might be simpler if it were!) But a lot of it comes back to money, even if it's not being spent directly on employee salaries and benefits. Here are four key questions to consider as you hire and promote employees and set their pay:
1. Are you hiring salaried employees or contract workers? And are you sure you're classifying your hires correctly? If you stick to classifying your employees as salaried, instead of contractors, you'll avoid the legal and headline headaches that have plagued Uber, Lyft, Handy, Instacart, and many another "gig economy" employers. Also, when deciding how to compensate your workers, it's a good idea to err on the side of decency--it will both help you attract better talent and serve as a competitive advantage.
2. Are you abiding by all federal, state, and city laws about minimum wages, paid sick time, paid leave, and other benefits? In the past few years, several changes have been enacted at both state and local levels, so consult a lawyer if you're unsure about what you're obligated to provide workers.
3. Are you being fair, transparent, and equitable about promotions, wages, and pay? Avoid the gender pay gap, help morale, and avoid more of those negative headlines by being transparent about your salaries, and by working to redress any discovered inequities. Your business will reap the benefits of retaining employees longer and seeing their productivity increase. Several experts recommend making salary data fully transparent to all employees, to help prevent the appearance of a gap, and to develop and share a formula for promotions and raises.
4. Do you want to provide employees with equity in your company? In 2016, AngelList, a site for investors and job seekers in such companies, provided data to Inc.'s Jill Krasny showing that 80 percent of job postings from U.S. startups involve some equity. If you think you want to give your employees a chance to share in ownership of your company, educate your workers up front about how they can cash out their shares and what happens if they leave the company. (And do get expert advice from your accountant and lawyers before trying to set up an employee equity plan.)
Chobani founder and CEO Hamdi Ulukaya did just this in 2016, giving employees stock worth about 10 percent of his company. "And the company is different because of it," he told Inc.'s Christine Lagorio-Chafkin last year. "The staff was always proud, but this ownership piece was missing. This is probably one of the smartest, most tactical things you can do for a company. You're faster, you're more passionate. Your people are happier."