How To Pay Your Employees When Starting a Business?

Starting your business brings with it a lot of challenges, especially during the first few months. For instance, if you have several employees, you will find it very challenging to pay them during the initial stages of the business.

During this phase, your business has not even started making a profit, and you will be at a loss on where to get funds to pay them.

Thankfully, there are some ways that you can come to an agreement with your employees and work out a plan that you will use to compensate them during the initial stages of starting your business.

Your employees will have needs such as families to feed and bills to pay, and for this reason, they will need to be paid even when your business has not started making a profit.

Knowing how to pay your employees when starting a business is very important for keeping your business running and ensuring that your employees are happy with their working conditions.

How to pay your employees when starting a business

There are several options and approaches that you can take to tackle the challenge of paying your employees when you are starting a business.

Let us now dive into how you can come up with the funds to pay your employees when your business has only just started.

When starting a business how do I pay employees
When starting a business how do I pay employees

1. Getting Outside Funding

You can look for investors that will cover the payroll for a few months before your business is stable and sustaining itself.

It will be quite a challenge to convince them about your business, and you will be required to present documents such as your business and what other plans you have in mind for getting your business from the point it is to profitability.

Outside funding can also be in the form of loans that you obtain from banks. Whenever you get the loan, compare the different available options, and do not be afraid about leaving one offer for a better one.

With the loan or investment, you will cover the payroll for the initial months of running the business. It would be best if you also had a plan in place on how you intend to tackle the investors by either paying them back with interest or giving them stakes in the business.

The loan will also need to be repaid on time, and you need to be prepared to take on the interest that it will accumulate.

When you have a business plan that has been prepared for all these possibilities and eventualities, you will be more comfortable when bringing in investors on board or getting a loan to cover the employees’ pay for the first few months of starting the business.

Doing some research before choosing a source of outside funding will also be considered critical for your business. When you conduct the research, you will weigh and compare options which makes decisions much easier to make.

Additionally, the research will make you aware of better options that will drive your business forward and ensure that you can sustain your business during the early stages of its establishment.

Consulting with trusted and experienced advisors will also guide you on the best funding options for your business. Some of the offers you get might seem attractive but have clauses in the agreement that will be uncomfortable.

Ensure that you have proper guidance when venturing into a financial agreement with other third parties from the outside, no matter how much you intend to borrow for your business.

The guidance will ensure that you are aware of all the conditions involved in the agreement and the implications of not paying on time or getting behind on payments.

Read Advantages of Being An Employee Versus Being an Entrepreneur

2. Give Away Shares

Stakes are an attractive way to bring volunteers on board when you are starting your business.

The initial employees can be cut into the business and given shares of the business. It will assure them of returns from the business, and their income will be based on their work in the business.

Additionally, they will also be motivated and dedicated to the business when they have a stake in it that they are entitled to. Shares will encourage the employees to work on the business and be more productive on the business.

When giving away shares to the initial team that works for your business, be sure to calculate all the factors and be aware of the figures. Give them shares equal to the amount of work they will have put into the business before it becomes profitable.

When the business has finally started turning a profit, you can give them their shares. Alternatively, you can invite them on board to be partners in the business.

This offer will make them want to be part of the business, and they will even become volunteers to ensure that your business can get off the ground. Whenever someone has a share of something, they will be more invested in the business.

Investing in the business in terms of volunteer assures the initial employees of returns later on. They will also be confident about the business and its potential to give the returns on their investment.

The employees who work based on company shares will also be ready to work longer hours to ensure that everything goes right and deadlines are beaten.

How to pay your employees in a small business
How to pay your employees in a small business

Read 16 Best Employee Benefit packages for Startups

3. Make Agreements with the Employees

Agreements are the driving force for many companies that have been founded with limited funds. They are why many transactions are successful and the basis for the economy we live and work in.

Without an agreement, it would not even be possible to load a web page on your browser as there would be limitations about cookies and privacy.

When starting a business, you can rely on an agreement made with your employees that indicates to them that they will start receiving payments when the business has started making a profit.

These agreements might be hard to accept, but the willing employees will stick around to wait for the profits.

In the agreement, layout all the conditions that must be adhered to receive payments.

Additionally, please specify an amount that will be added to the employees’ payments when they finally get their pay. Once your business has started turning a profit, the agreement will ensure that your employees will be able to get paid, and from here onwards, you will resume with normal salaries and benefits.

You can even make the offer more attractive by specifying a greater amount for the duration in which the employees will not be receiving payments. This will encourage them to stick around longer even when they are not receiving payments.

It is important to have an agreement that is reasonable and easy to understand. During the initial stages of your business, the employees you work with will be willing to work for nothing in the first few months when they know there is something good waiting for them.

An attractive offer will even attract more volunteers to your business. With an agreement, you will not have to worry about salaries for the first few months, and your employees will be able to put in their efforts for the promise of a reward.

Be sure to include a clause that specifies how the people that pull out of the agreement before the duration is over will be compensated. Sometimes, the employees working for nothing in the first few months will lack motivation and try to pull out of the agreement.

Creating scenarios where you specify their reward when they pull out prematurely is important, and you should specify that they will be paid for the duration they have worked for. This will create confidence in your employees, and they will not be afraid of working for your business no matter the conditions.

Having a special arrangement with your employees ensures that you are getting honest work from them. Some employees will be unwilling to put any work into the business when they are not getting their pay for some initial cycles.

However, the initial delay is only intended to get all players on board and ensure that the business has a system that will turn a profit for them.

Make the arrangements clear and explain each detail to the employees before bringing them on board. This will prevent any confusion and misunderstanding down the road and ensure that you are working with employees dedicated to getting the work done.

Read 10 Profitable Home-Based Internet Businesses Ideas

4. Have the Initial Salary in Reserve

Setting aside some of the funds that you intend to use to start your business for paying your employees in the initial stages of the business is important.

A reserve for the initial salaries will ensure that you do not involve your employees in contracts and agreements they are not comfortable with.

It also lets you keep everything professional without complicating matters for you. When you set aside money for your employees, you will be able to pay them.

Paying them from the very start also prevents any questions, and there is no unwarranted attention or suspicion on your business. The confidentiality of your business will also be maintained and upheld.

How to pay your employees when starting a business
How to pay your employees when starting a business

As a business, you will be able to account for all your employees, and working with them will be professional. There will be nothing about making an agreement, and you will be getting the full productivity from them.

They will not work as if they have an interest or stakes in the business but as employees hired to work for the business.

When you have the money to pay your employees when starting a business, you will no longer have to worry about upholding agreements and arrangements.

When the business finally starts turning a profit, you will be able to continue giving them their usual monthly salary and all the benefits without skipping a beat.

Your business will keep running and sustain itself and even cover the cost of paying them their initial salaries. At the end of the employees, they will not notice any difference and will continue working for your business as usual.

Factoring the initial salaries into your business plan will also inform you how much you need to set aside.

The amount will be determined by factors such as how long your business will start making a profit and the number of employees you will be hiring. When you have all this information in mind, you will get to plan better for your initial months and set aside enough for all your employees.

This means that your employees will be covered when your business is getting started, and they will not need to be worried about their payments.

Related business articles:


One of the main challenges that businesses face while they are in the initial stages is covering the employees’ payment. The employees are working for pay, and very few will be willing to make other different arrangements with the business.

When you plan for the duration in which your business will not be able to sustain itself, you will be able to keep the business running long enough to start earning revenue.

The returns will eventually come for your business, and when you have made enough arrangements to cover the cost of salaries, you will have a better relationship with your employers.

Paying them on time ensures that there are no conflicts with the business, and the employers understand that you are an honest business with all their needs at heart.

The points that have been outlined above will be useful in showing you how to pay your employees when starting a business. Some of the methods will cost you more than others, while others will not involve money.

Understanding all the points you have available will ensure that you can choose a compensation plan that works in the interest of the business and the employees.

When you plan to pay the employees as you start your business, you will be able to get maximum productivity from them, and the relationship you establish with them will be stronger.

Additionally, you will assure employees that they will benefit from your business no matter how long they wait to start seeing these benefits.