4 Employment Law Issues that every startup has to face in the First Year
Employing new members to the team of employees is an overwhelming task for any employer but it poses great difficulty especially for startup founders. It is a very confusing and time-consuming minefield, and the consequences of making a mistake can prove to be very costly and financially devastating.
Here is a list of the employment issues startups face in the first year and what to do when faced with these matters-
1. Classification of Employment
It’s very important for the employers to classify their workers correctly to avoid legal proceedings against them. Whether the employees are correctly classified as employees or independent contractors is a widely contested issue, currently.
2. Equity Plans
The main technique which the startups use to attract good talent is by offering equity in the company. Doing this however is not an easy task.
From the beginning itself companies should develop an equity incentive plan, including how much equity to divide among employees, the number of shares granted and vesting schedules.
3. Paid leaves and Time Off Policies
Startups are bound to provide extra perks to the employees so as to attract them to join the startup. Before startups decide to provide these perks, they must first decide how much sick and vacation time they will allow employees to take each year so as to avoid any issues during the course of employment.
4. Drafting of Employment Contracts
Startups should decide whether to hire a lawyer to draft an initial set of employment documents such as offer letters, shareholder’s agreement, separation agreements etc., so that they are exact and precise or to download these documents off the internet or take them from other companies and avoid a lawyer altogether.
It’s very important to keep in mind that even a minutest phrasing change in employment contracts can have significant repercussions, so hiring a lawyer to draft and review these documents is the ideal route once revenue starts coming in.
About the Author
This article has been authored by Ayushi Sharma, Founding Intern at LegalNow.
