Co-founders, team & legal

How do I compensate early employees with salary and equity in India?

Pay a fair, honest salary you can sustain plus meaningful ESOPs from your option pool, early employees take real risk and should share the upside. Structure ESOPs as a proper shareholder-approved scheme and be transparent about vesting, strike price, and the perquisite tax at exercise. Don't oversell equity as a substitute for a livable salary; be clear-eyed and generous, not vague and stingy.

Go deeper

3 resources, 3 link-checked.

📄 Article
✓ Link checked India Free Advanced

The official Indian government primer on structuring ESOPs for startups, a primary source on the rules that most blog posts paraphrase. Essential before you promise equity to early hires.

Employee Stock Options for Startups (Startup India)

From startupindia.gov.in by Startup India / DPIIT Official primer

  • ESOPs must be approved by at least 75% of shareholders
  • The gap between market value and exercise price is taxed as a 'perquisite'
  • ESOPs are a core tool for hiring and retaining early talent when cash is tight
Open startupindia.gov.in →
📄 Article
✓ Link checked Free Intermediate

YC's full curated body of hiring wisdom, from when to hire to how to close and evaluate early employees. The best free, high-signal resource for founders hiring for the first time.

Hiring & Recruiting (YC Startup Library collection)

From YC Startup Library by Y Combinator Curated essays + talks

  • Wait longer than feels comfortable to make your first hires
  • Hire generalists with high slope, low ego, and comfort with ambiguity
  • Use paid work samples and honest reference checks over trivia interviews
Open ycombinator.com →
📄 Article
✓ Link checked India Free Advanced

A detailed, clause-by-clause drafting guide with Indian legal context, including enforceability and state-wise stamp duty, that goes deeper than a generic template. Written for Indian founders specifically.

Co-Founder Agreements in India 2026: A Comprehensive Drafting Guide

From lawsikho.com by LawSikho Long read

  • Enforceable under the Indian Contract Act only if properly executed and stamped
  • Must-have clauses include vesting, leaver provisions, IP assignment, and deadlock resolution
  • Stamp duty varies by state, so localize the document
Open lawsikho.com →

Terms in this answer

Vesting

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