Startup School: Employee Basics

Stanford course CS183B: How to start a startup . Started in 2012 under the leadership of Peter Thiel. In the fall of 2014, a new series of lectures by leading entrepreneurs and Y Combinator experts took place:



Caroline: Now let's talk directly about doing business. First, let's deal with the founders salary. As already mentioned, a startup is a legal entity and, so to speak, exists separately from its founders.
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No matter how beautiful the position of the company's founder sounds, in fact you are just an ordinary employee who should receive a salary. Working without a salary is prohibited by law, so the founders should not take this risk.

You would not have worked without payment elsewhere. How does your startup differ from other places of work? The company is obliged to pay tax on wages.

At YC, we worked with one company that did not pay taxes on salaries for three years, and she had to pay dearly for this. In extreme cases, a person can simply be sent to prison. In that case, fortunately, everything worked out.

The conclusion from this story: get a service that will keep a record of wages; it costs a little money. Know the measure and do not spend too much money on wages.



A few words about the breakdown of relations between the founders. In this case, I mean the situation when one of the founders is asked to leave the company.

Since the founder is also an employee, then, in fact, it turns out that other founders dismiss him from the company. Here it is worth mentioning the payment of compensation to the bygone founder, because the situation may worsen in the case when the founders do not pay their salaries.

The dismissed founder can state the following: “My lawyer said that you violated the law by not paying me a salary. If you pay me and issue a few shares of the company, which, generally speaking, I do not have rights, I will write a letter of resignation, and we will forget about this unpleasant situation. "

The remaining founders in the company will probably think that the deal is beneficial for both parties. The result is that the disgruntled founder leaves you, and, even worse, the remaining founders have to do his job.

While they are working hard, the former founder, who received his shares, thinks: “Everyone has got his own way. Let them do what they want now. ”

Thus, to avoid unnecessary trouble, pay yourself a salary, pay appropriate taxes on it and treat the salaries of your founding colleagues as a marriage contract.

Kirstie: As founders, sooner or later you will need to hire new employees. In previous lectures, much has been said about how to look for these people, how to choose the right employee, and how to increase his productivity. What needs to be done after you find the right employee?

In the US, there are many laws related to hiring people, so it is especially important to understand what works and how. As in other cases, if you understand the basic principles of recruitment, you can avoid unpleasant situations. If this process becomes too complicated, you may need the help of a specialist.

Both full-time and freelance employees must sign an agreement to transfer the intellectual property that they create to the company. This is important because contract forms and payment methods are very different.

The freelance employee, as a rule, independently can choose the schedule and place of work. He is given a project in which the final result is indicated. As a freelancer will achieve this result - his own business. He has his own equipment, and he does not need to come to the company every day or follow any instructions.

Another thing - a staff member. He also needs to fill out an agreement on the transfer of intellectual property rights, but when the company pays him a salary, it will have to levy a certain tax on it. The company is responsible for paying these taxes to the appropriate federal or state agencies.

Both founders and employees should receive a salary. You can’t just say: “I’m paying with shares. They are satisfied with such a reward. ” They need to pay at least the minimum salary.

So, the main thing is to use the services of payroll services and know the basic principles for hiring new employees.

Carolynn: One of the partners of YC once said: "You are not the real founder, if you have not had to dismiss anyone." It’s really hard to lay off employees.

There are plenty of explanations for this, including because the founders often hire their friends to work. They often hire former colleagues or get very close to their employees, because in a startup they have to work very closely with each other. But in each company, sooner or later an employee appears who fails to cope with his tasks.

The dismissal of such an employee makes the founder a true professional, because he has to make a choice in favor of the company.



Tips for firing employees:

Tip one: do it quickly. Do not allow a bad employee to stay long in his position. It is much easier to postpone an unpleasant conversation with an employee, but this will only cause you more trouble. If the problem employee does not leave, the one who brings you real benefit can leave. In addition, when someone does a poor job, you may lose money or customers.

Tip two: try to communicate effectively. Do not make excuses and do not shirk when trying to explain why you are firing a particular employee. Never apologize. Try to speak directly, for example: "We are forced to release you from your position."

We do not need blurry phrases like: “We are very sorry that in this quarter your level of sales was not high enough, blah blah blah.” Tell me straight that you're firing an employee. Ideally, there may also be a third party.

Third advice: immediately pay for the work and leave of the employee. We will not comment on anything, because this is required by law.

Tip Four: Restrict access to electronic systems. As soon as an employee leaves the company, close the physical and electronic access to its resources, monitor the safety of data in the cloud, change passwords. At YC, there was a case when one of the founders got access to a company account on GitHub and seized his password while his colleagues tried to fire him.

Fifth advice: if a departed employee holds company shares, she should immediately buy them back. Thus, one of the hallmarks of a truly successful founder, oddly enough, is the ability to part with their employees.

Kirstie: Let's summarize everything that was said. Try to simplify all possible processes. Ensure that all standard procedures are followed and all documents are kept in a safe place. Make sure you know what you are doing.



A huge role is played by the distribution of the founders' shares in the company, so it is necessary not only to draw up a work plan for the next three months, but also to think about the company's long-term prospects.

Make sure you know what financial documents you are signing. You can't just say, "I will take these one hundred thousand." Both you and your employees are required to receive a salary. All employees must transfer intellectual property rights to the company. If the intellectual property does not belong to the company, then the value of this company is equal to zero.

If an employee needs to be fired, do it wisely and without delay. We did not mention the main metrics: at any time you should be able to determine how much cash you have left, what the company's expenses are and when your funds run out in order to have time to negotiate with investors.

Work in a startup for the most part consists of following the rules and a serious attitude. It is not as bright as it is described in movies and TV shows. You must take it very seriously.

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Announcement:

December 17, 2015 (Thursday) at 18:00 will take place DEMOday of the seventh set of Accelerator FRIA.

Our DEMOday will feature our best startups who successfully passed Accelerator. Each startup will present a small presentation and answer all your questions.

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