Co-founders, team & legal

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

The short answer

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, your way

3 hand-picked resources, 3 link-checked. Pick how you want to dig in.

📄 Article
✓ Link checked India Free Advanced

Why we picked it 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

Why we picked it 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

Why we picked it 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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