How to reward early employees?

In many startups there are some #1 or #2 employees who helped the whole business all the way.

I've got couple guys like that, I'd love to give them more than the salary (even though our salaries are pretty decent unlike many startups ) they are still working extra hours, put a lot of blood and sweat which they wouldn't need to in a big corp.

I thought of giving equity but what happens if they decide to leave 3 months later?

If we sell the startup in some point, isn't it a bit shame for these hard workers as they are not entitled to get anything? What other startups are doing in this stage?

Don't give away your equity without careful thought, planning and an attorney. It complicates everyone's life in so many ways if it is not done correctly.

A much simpler way is to profit share with key employees. Setting aside a percentage of profits to be split among key employees shows generous gratitude and gives them a stake in the past and present success of the business.

You seem to have good intentions, so it would be a shame to spoil a good thing by giving them something they don't want. It doesn't sound like the subject of their getting equity has come up. They may like the fact that they are not tied to the company (They may be reluctant to leave if it means losing too much in the process.).

You may be shocked at what they may consider a bigger thank you than equity, profit sharing/more money. Have the company pay for a cell phone card for their laptop. Hold a company meeting at a resort. If you are asked to do any public speaking, interview, or blog, invite one of them along or see if they could do it in your place. Sponsor an open source project of theirs or give them a budget to test one of their ideas.

Sometimes we don't want to spend money on ourselves but appreciate it far more when someone else does. That's why you buy a round at the bar instead of just handing everyone a few bucks.

Have you considered vesting equity? That protects you when they walk in three months and provides a level of stickiness that salary doesn't give.

Options work well for this sort of thing. Vested equity is another good method if you can't give stock options although vesting a percentage of an LLC is tricky to do.

Recognizing and showing appreciation for the contributions, accomplishments and efforts that your #1 and #2 employees have made will go a long way.

As Jeff O above mentioned benefits like cell phones, laptops, meetings at a nice place, etc also help.

At the same time, I found the value and motivating effect of consistently recognizing and showing appreciation is much more effective than any tangible benefits I gave out. It takes more time but will not cost dollars you do not have.

If you sell the start up, some options to keep in mind are you can write in the sales agreement that the new company must keep the employees for x years. You can also give these employees bonuses at the time of the sale either from your profits or have it written into the sales agreement.

I have no idea how to reward early employees. But I am pretty sure that profit sharing simply doesn't work .

This is because the founder can usually reduce the amount of profits need to be shared by the shady practice of hollywood accounting. If your employees are smart enough they will surely reject any form of "profit sharing".

Give them equity might work, but I don't know enough about that to comment.