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Want to keep User Experience designer on the team?

My partner and I (who hold all the equity in the company) are developing a social network and have really liked the user experience designer we are using. He is an independent contractor and we are paying him a good hourly rate. We won't be able to bring him on as an employee and pay him a salary until we get angel money hopefully shortly after we launch. What is the usual way to incentivize a person like this to stay on the team? Can I give him stock options even though there is no stock option plan? Should I give him restricted stock? Any sense of how much I should give? He is an independent contractor so technically I could let him go tomorrow and find someone good to replace him, so I think I have quite a bit of leverage. But I want him to be happy and want to stick around. Thanks. To be clear, the idea is not to threaten to terminate his independent contractor agreement if he doesn't come on as an employee. That's ridiculous. The question is what would we need to do to make this guy want to stay with us.

Public Comments

1. Well, if you really like his work and all that, you really shouldn't even consider making any threats of letting him go and replacing him... that's not leverage, that's "ass bastard". I wouldn't even consider taking a full time offer from someone who says "either you come work for me full time, or I'll terminate your contract." *cringe*... why would ANYONE work for someone that behaves like that? I'd be thinking "Man, it's a good thing I'm an indy contractor and not this guy's employee! What a jerk!" So... what to do, eh? Your real leverage is that you will be paying his taxes for him, instead of him having to match his own SS, and file his own payroll taxes, and file 1099s and such... you make his financial life easier, and if you pay him the same amount that he's asking for as a contractor, he comes out ahead of the deal due to the taxes... but you end up paying more because you have to match his SS. However, he's giving up his "indy" status, which may be a major motivation for him. Not everyone likes "working for the man"... there are those "rugged individualists" that are too independent and willful to work for someone else in a "boss to employee" relationship. As a contractor, they get that sense of "I'm my own boss" and "you're not my boss, you're my customer/client." They also have the benefit of, if they lose a client, that's a lost customer... not "getting fired from a job". So their resume' is not hurt. Keep all of these things in mind... If he really is as good as you say, you may want to cut him in as a partner instead of an employee.