Paying a part of an employee’s salary in equity allows you to optionally pay less cash as compensation.
There are also workers who prefer to get more equity instead in exchange for being paid below the market rate. By having an equity plan in place, you are able to attract those types of workers. Moreover, in times of difficulty and crisis, such as when the company gets into financial trouble or there is a global economic downturn, workers who have equity in the company tend to go above and beyond to try to make sure the company survives and succeeds. They are willing to make the necessary sacrifice such as taking a pay cut because they are invested in the company and they really want to see their equity become worth something.
In addition, equity compensation also has long-term benefits to a company or organization. For instance, studies have shown that employees paid in equity are more likely to stay with the company for a longer period of time than those who are not. This in turn saves the company time and resources that would otherwise have been spent on recruitment and training of a replacement.