Instead of a flat salary, employers can structure compensation for remote workers to include a dedicated, non-taxable reimbursement for office expenses. For a $100k employee, this might look like an $85k salary plus a $15k tax-free reimbursement, reducing the employee's tax burden.
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Structuring your business as an S corporation becomes tax-advantageous once income surpasses $100-150k. This allows you to pay yourself a "reasonable salary" subject to payroll taxes, while the remaining profit can be taken as a distribution, which is not subject to Social Security taxes.
When discussing compensation, frame equity as providing four things: cash flow, sale bonus, risk, and control. Most employees only want the first two and actively avoid risk and aren't getting control anyway. This simplifies the conversation and allows you to offer profit share and sale bonuses instead of actual shares.
To combat long commutes and encourage office presence in expensive cities, companies are offering down payment assistance or low-interest loans. This perk benefits both the employee's finances and the employer's goal of having a more engaged, local workforce.
Many entrepreneurs miss that a portion of their home cleaning service is tax-deductible as part of the home office deduction. The rationale is that any commercial office lease would include maintenance and cleaning costs, and the home office is no different.
A tax deduction lowers your taxable income, saving you an amount proportional to your tax bracket. In contrast, a tax credit directly subtracts from your final tax bill, offering a full dollar-for-dollar reduction. Prioritizing actions that yield credits provides a much larger financial benefit.
To conserve cash, especially in a downturn, founders can pay key employees 10-30% below market rate in salary. The key is to compensate for this deficit by offering double or triple the industry standard in equity. This strategy attracts top talent aligned with long-term success while keeping the company's cash burn rate low.
To encourage a return to the office while offering flexibility, one founder told his 100% remote team that only the top 25% of performers could continue working from home. This created a strong incentive for performance across the company.
When choosing between a higher-paying office job and a lower-paying remote one, base the decision on your primary source of energy. If you thrive on human interaction, the in-office environment is more valuable than the pay differential because it fuels your soul and performance. For some, the environment is non-negotiable.
Top performers happy in their roles won't move for a standard pay increase. To recruit them, dig deep to find personal pain points. Offering creative solutions like covering housing costs or children's tuition can be more compelling than a higher salary alone.
Beyond salary, many founders use the business to cover personal expenses, effectively increasing their compensation. Founders reported expensing 50% of their rent, Wi-Fi, and gym memberships, while others leverage business credit card points for thousands in monthly cash back—value not reflected on pay stubs.
