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Updated August 24, 2022You’re reading an excerpt of The Holloway Guide to Technical Recruiting and Hiring, a book by Osman (Ozzie) Osman and over 45 other contributors. It is the most authoritative resource on growing software engineering teams effectively, written by and for hiring managers, recruiters, interviewers, and candidates. Purchase the book to support the author and the ad-free Holloway reading experience. You get instant digital access, over 800 links and references, commentary and future updates, and a high-quality PDF download.
Equity is a key part of compensation and hiring plans. In larger companies, defined employee stock plans or grants of restricted stock units (RSUs) are common.
Startups grant equity as a key part of compensation, and plan its allocation. Generally before the first employees are hired, the founders will reserve a number of shares for an employee option pool (or employee pool), which is part of a legal structure called an equity incentive plan. A typical size for the option pool is 20% of the stock of the company; but especially for earlier-stage companies, the option pool can be 10%, 15%, or other sizes.
Well-advised companies will reserve in the option pool only what they expect to use over approximately the next 12 months, so as not to over-grant equity. Your company may never use the whole pool, but it’s still wise to try not to reserve more than you plan to use. The size of the pool is determined by complex factors between founders and investors. It’s important for employees (and founders) to understand that a small pool can be a good thing in that it reflects the company preserving ownership in negotiations with investors. You can always increase the size of the pool later.
important Once the pool is established, the company’s board of directors grants stock from the pool to employees as they join the company. Hiring managers don’t typically have much say over those amounts, but you will want to be aware of the details so as to be able to discuss compensation with candidates.
candidate For more information on equity as part of the compensation package, visit The Holloway Guide to Equity Compensation.
Definition A job requisition (or job requisition form) is an internal company document a manager uses to formally request permission to fill a role or position. These documents are particularly useful for coordination and wider alignment at larger companies. For instance, the requisition might require approval (often from finance, HR, and upper management) to ensure sufficient space and funding are available for a new hire. Once the requisition receives the necessary approvals, it can serve as the starting point for a discussion between the hiring manager and their designated recruiter (for instance, at a role intake meeting).
Companies that use such forms will usually have a template the manager can fill out to share information the decision makers need, including:
A title and brief description of the role