Training & Development

Three Biggest Mistakes Start-ups Make With Employee Pay

by Clifford Stephan |

July 29, 2017

Few places are as exciting as a new start-up—the technology, talent, and fast pace can make it a great place to work. But making sure a company gets to grow into something other than a failed start-up is a tricky balancing act.

There are a lot of elements that are needed to ensure a company’s success, but few factors are as important as a company’s talent acquisition strategy. Paying employees is the single biggest expense of a new company—you have to be informed, strategic, and efficient with your spend. If a start-up can avoid these three pitfalls, chances are it’ll be much easier to make it to the top:

1.      Don’t know the competition. Start-ups know they have to battle multiple companies for the best talent, all day,   every day. But unless you know what the competition is paying, you could be losing the war. While the competition doesn’t necessarily dictate what you pay your employees, having this information can be an important benchmark and guide for keeping pace with the industry. It can be really helpful to manage your day-to-day decisions, as well as give you a global perspective when enacting your compensation strategy.

2.      Don’t have a compensation plan. Not having a clear strategy and plan in place can be a major pitfall for a start-up. Often, start-ups don’t have the resources or programs to ensure their managers are making informed decisions about employee pay. Without a clear compensation plan, daily decisions about bringing on new employees and retaining current ones can be subjective, uninformed and ineffective. Worse still, this practice can often lead to overpaying low performers, underpaying high performers, or diverting funds from critical departments.

3.     Don’t have a strategy for going after top talent. Everyone in Silicon Valley is going after software developers and designers. But without a talent management strategy, chances are you will miss out on the critical talent you need to drive your business forward. Know your competitive position and have a compelling reason why top talent should take a chance with your company. Hint: solid pay, equity, a clear career path, and exposure to new technologies are often top of their list.