Comment by boulos | Hacker News Reader

Comment by boulos | Hacker News Reader

I think the overall sentiment is right for an early stage company: you don’t want any employees (including the founders!), worrying about covering their expenses.

Personally, however, I would be more fluid than “constant dollars”. Some people need more cash, and others need less. There are definitely people who would say “I basically don’t want any cash, just get me health insurance and more lottery tickets” while others would say “Look, I would love to do this, but my family needs take home pay above this level”.

Letting employees trade off equity versus cash comp at their discretion via a formula seems fair to me. Anyone who reduces their salary is effectively reducing the amount of money needed for fundraising or time to needing funding (and vice versa, for more cash). For that reason, the trade off is also non-linear for the company: early dollars are worth a lot more than later dollars (though the price per share sort of reflects this). Said another way: if you had a $175k baseline salary, but let all employees also exchange $$s-for-shares at the current valuation up to some limit, you should probably do it! (Large company ESPPs are sort of this). Doing this exchange ahead of time is just more tax efficient than “first we pay you cash, then you buy shares from the company”.

> equity versus cash comp

For me, the main tradeoff is not compensation, but time. I'm prepared to trade away compensation for fewer hours.

But if I want to work a maximum of 32 hours instead of 40, then I essentially have to rule out most of the jobs I would otherwise apply for. It's not a criteria where most employers offer flexibility.

It's certainly becoming more popular every year. I have friends that do a 50/50 job share, other friends that simply take an extra 2 months unpaid leave every year, and quite a few friends who only work 4 days a week (and get 4/5th pay).

I pitched my boss that I would get all my work done AND it would be good for him because it would help him meet budget AND build resiliency in the team (They have to deal with outages without me - so I created more documentation around that). After lots and lots of back and forth my boss eventually accepted, and I never worked more than 4 days a week again, and most weeks it was only 3 days.

Keep pushing for it, and find a company/boss who is open to the idea. Fire your current one if they're not willing to negotiate.

Solid advice! With some persistence (and a strong résumé), I was able to secure a 32-hour position a few years ago. Like most jobs, I found it through networking (a Papers We Love Meetup). But all good things come to an end and I'm looking again.

The main issue is a lack of institutional support:

• While there are a decent number of potential employers who would be open to 32-hour-full-time, there's not a good way to reach them. RIP 30hourjobs.com I'm afraid.

• Recruiters are completely baffled by the idea that "full-time" doesn't necessarily mean 40 hours, even if the IRS determination is minimum 30/week or 130/month: https://www.irs.gov/affordable-care-act/employers/identifyin...

• Many companies simply don't have the HR flexibility to handle anything other than 40-hour full-time cogs. (I think this may be different in parts of Europe, where I understand there are laws that allow employees to choose to work fewer hours, so companies have to find a way to accommodate them.)

Do you then get paid the same hourly rate, but just fewer hours? I like this idea, but I also know that there is an upfront cost of staying in the loop that is about the same no matter if you end up contributing 1 hour per week or 80. So maybe 32 hour people get slightly less per hour than 40, all else equal? Curious how people already doing this handle this.

It's probably the opposite - the marginal value of the work done from 32 to 40 hours is a lot lower than the first 32. In fact I doubt most organisations would be able to distinguish between the output of someone working 32 vs 40 hours. Instead of trying to measure though it seems fairer to just keep a straight hourly rate no matter how many hours you work.

Personally, part of my extracurricular time is occupied with activities which actually make me more valuable, such as open source work, organizing study groups, and presenting at meetups.

But I also have family obligations that I cannot set aside, and I can't do all of these things without burning myself out. Fortunately I am in a position where I can afford to sacrifice some compensation — and that's what I choose to do.

So even setting aside your point about the marginal value of the last 8 hours (which rings true), in my case there is definitely no question about the value of each hour.

This is something I've wanted to do for a while, and I've had success with it. At my previous employer, I did in fact work 32 hours per week, and it was great.

When I left there (for reasons), this was something I discussed with all three places that made me an offer. IIRC, one offered me 32 hours a week, another 32 (I think), and the third 36. I ended up accepting the 36 because it seemed like the biggest challenge for me.

I brought up my desire to work < 40 hours a week as early as possible with places I interviewed, and some just said "no way", which ended the interview process quickly.

For context, I'd been in software dev about 18 years when I was going through my last set of interviews.

Anyway, I'm just responding to say that it's possible to find places willing to do this, though obviously the more desirable you are as a candidate the more likely you are to find an employer willing to go for this.

The other alternative is to try to build up a consulting practice, and to simply not take on that much work. But this is a lot more stressful from a financial security perspective, having done this for a bit myself many years ago.

Thank you for doing this.Experienced folks leveraging their talent to get a deal like this makes it easier for the rest of us who may not have as much leverage. I would love to see a sane work week normalized.

Agree with you on this. We do that at my company Divvy. Each prospective hire is given 3 different options (varying levels of cash / equity). The "implied" value of all three at the current valuation is the same, but as you mention some people prefer more equity upside and some prefer more cash in hand.

Wow. That's an absolutely fantastic way to do this.

Awesome! Any lessons learned? (The main one I’ve seen and worried about is sophistication of employees with their equity. Options are confusing! But that’s true whether it’s a single offer or multiple perspectives).

In general, it seems to be appreciated. We initially set it up this way to help take some of the stress out of negotiation (as that favors certain people over others). A few learnings off the top of my mind:

1. Regardless of the structure, the offer needs to be competitive. This wouldn't really help with lowballing offers.

2. Across the ~30 offers I've given out, I don't think that either of the 3 variants is more common. I suppose that indicates that different candidates are indeed optimizing for different situations.

3. Our hiring has intentionally skewed more senior and I think the variants of offers has helped create more family friendly offers.

Regarding options, I tend to make sure to offer to spend a good bit of time laying out the details of how they work (strike price, preferred value, vesting, cliffs, early exercise, etc.). They are indeed confusing and I find that people typically either overvalue the value of the options today, or undervalue the potential upside.

How much do you space out the three variants? Have you gone beyond the endpoints? (But followed the same curve)

Depends on the role/level, but ~10-15k annually between each tier. I have gone beyond the endpoints (within reason) by just linearly extrapolating, though that tends to be pretty uncommon.

Interesting. I wonder how this plays out in practice - what choices people tend to make.

I wonder if there are politics for people who take more cash and less stock - does mgmt assume it implies less good will, since the employee is literally “less invested” in the outcome?

Can only speak to my experience, but I am completely indifferent to their choice. Either of the 3 tend to be relatively substantial in equity, so everyone is invested in some regard. I also believe that in the long run, unvested options aren't the best retention strategy and that a challenging and rewarding work environment coupled with competitive compensation is the way to build an invested team.

But why not give everyone cash consistently and then allow them to buy equity as they desire, when they desire, by reinvesting in the business at the current prevailing rate?

As even Homer Simpson figured out "Money can be exchanged for goods and services."

Isn't there a tax implication? Tax is one reason part why people choose non-monetary remuneration. I'm not American, but my guess is in all jurisdictions that tax would vary based on the type of non-monetary remuneration.

I guess it would depend how you structure the purchases. If you allow for the purchasing of a common share at the 409 valuation, you wouldn't have a tax hit until you sell it. You would be taxed on the salary used to purchase the share, however.

I'm not aware of any tax advantages of equity compensation in the US versus cash compensation. If anything, it could be a liability in the case that it's not actively traded, or if you trigger AMT and aren't able to sell the stock to pay the taxes.

The type of compensation that comes with tax benefits is things such as subsidized health insurance, 401k retirement savings, commuter benefits, dependent care expenses, tuition, etc. That type of stuff is basically non taxed income.

If you get lucky and your options both appreciate and become liquid, this windfall is taxed at long term capital gains rates.

That depends on the facts and circumstances. If they become liquid and valuable before you exercise them, you’re taxed as wages or short-term capital gains rates on those gains.

I’m no expert but I thought the worst case was AMT, which taxes the bargain element when you exercise an option (rather than when you sell the received shares and recognize the gain). Are you talking about a tax on granted options, or when options are in the money but you haven’t exercised yet?

There is no tax due on unexercised options (which is not what I meant to imply above, but I left it ambiguous).

If you have non-qualified stock options (NQSOs), on the day you exercise, the difference between the strike price and the fair market price is taxed as ordinary income. That's what I was talking about.

If you have Incentive Stock Options (ISOs), the tax treatment can be more favorable if you follow certain rules, primarily that you have to sell the shares no earlier than two years after the option grant AND one year after you exercise them. The AMT calculation comes into play between the exercise and sale.

Basically, figure out exactly what you have, as the type of instrument you have changes the taxation, and read the tax laws on that. This is not tax advice.

ISOs with an 83(b) election (and then “hit”) are much more valuable than W-2 income from a tax perspective. (Whether that W-2 income is cash salary or RSUs.)

But that comes with the risk of over paying taxes, so not exactly comparable to cash compensation.

In the current tax code. Wouldn’t some of the proposals to consider more capital gains as income change that?

Interesting thought. We're a private company, so the stock is still illiquid. That wouldn't prevent purchasing stock, but the question is where it would come from. Option pools are used for new employee grants so that could work, but when that runs out you need to typically create additional shares and dilute the other holders. Will put a little more thought into this.

There typically is no "prevailing rate" for a startup. So just figuring out the tax implications is too much work to do it like this. Also, usually you're giving people options rather than equity; you can afford to give people larger option grants because of vesting than you could afford to sell them equity.

One issue here is insider trading. Not necessarily in a breaking-the-law sense, but people who work at a startup may have a better and more up to date sense of how things are going than whoever performed the last valuation.

This 3-tier presentation is used at a couple places and would caution it as a way to anchor you on salary and equity. A lot of hires will negotiate the “salary high” and “equity high” option, saying they want no sacrifices, get both and join thinking they got a great deal.

There are companies that do this, like Brex.

> Letting employees trade off equity versus cash comp at their discretion via a formula seems fair to me

It's an incredibly unfair way to compensate.

If you've come from a less privileged background you don't have family support, likely won't inherit anything, probably don't own a house. Your priorities will be to shore up some basics in the short term, like breaking a hand to mouth existence or possibly working towards a mortgage.

But focusing on your needs, due to the lack of wealth in your family and history, means that you must give up hope of future wealth, foregoing the same value and benefit that those who can afford through their privilege to take... Far more share options, the lottery tickets.

I find the idea so repulsive that when I was offered roles twice at Monzo I refused both purely because of this.

If it isn't already an unequal workplace that is biased towards those who started out with more then this guarantees it will become that. The only people who benefit from this are those that started with the privilege of wealth... Likely the white middle class male.

I don’t quite follow... rich people and poor people have different needs, sure, but why is it bad to give people options that help meet whatever their needs are?

Do you have a better suggestion?

> why is it bad to give people options that help meet whatever their needs are?

Because it perpetuates and worsens inequalities.

The rich are effectively paid to their value whereas as you admit the poor are paid to their needs.

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