What to Pay Your First Hires: A Startup Salary and Equity Guide for Australia and New Zealand

Compensation is where most first-time founders either overpay out of anxiety about losing a candidate, or underpay out of a genuine but outdated assumption that "startups just pay less." Neither is a strategy. Here is what the actual data says, and how to think about the trade-off.

What the market is actually paying

Ravio's 2025 Australian tech compensation report puts a mid-level (P3) software engineer in Australia at a median of AU$138,000, compared to AU$143,000 in the UK and AU$228,100 in the US on the same scale. Hiring activity rose sharply in 2025, up to a 32% hiring rate from 25% the year before, while attrition held at 19.2%, above the 17% global average, a genuinely competitive market where good people have options.

The same report notes something specific worth taking seriously: entry-level hiring (P1 and P2 roles) fell 73.4% over the same period. Companies are hiring, but overwhelmingly for people who can contribute immediately, not people who need months to ramp. If you are hiring junior, expect a smaller pool of open roles competing for the same candidates, which changes your pitch: you are not just offering a job, you are offering one of relatively few genuine entry points right now.

And the "cash poor, equity rich" framing that startups have used for a decade is losing ground. With capital concentrating in fewer, larger rounds (Cut Through Venture's Q2 2026 data shows deal count at its slowest pace since before 2020 even as total capital stays relatively high), well-funded startups are increasingly competing on cash, not just upside, for the experienced candidates everyone wants.

How to think about cash versus equity

A useful, if blunt, way to frame it: cash pays the bills today, equity is a bet on a future that may or may not happen. Most candidates, reasonably, need enough cash to live on before equity becomes a meaningful part of the decision. A below-market cash offer padded with a large equity number rarely closes a strong candidate who has other options, because they can do the math on how many startups actually return meaningful equity value.

A workable rule of thumb: get cash to a level the candidate can genuinely live on and would not feel foolish accepting even if the equity turned out to be worth nothing, then let equity be the real upside case on top, not the justification for underpaying.

Vesting: what's standard, and why it exists

Cake Equity's 2024 research on Australian startup equity found the majority of companies use a standard structure: a 12-month cliff, meaning an employee who leaves before their first anniversary gets nothing, followed by continued vesting over a further 36 months, four years total. This is not a trick or a founder-favouring clause, it exists to protect both sides: it protects the company from granting equity to someone who leaves in month three, and it protects genuinely committed employees by guaranteeing their equity accrues predictably rather than at the company's discretion.

If you are offering equity outside this structure, be able to explain clearly why, to yourself and to the candidate. Deviating from a norm without a good reason usually signals something is off, either about the equity or about the offer.

Tax treatment: get this part right before you promise anything

Under a tax-deferred employee share scheme, the ATO allows employees to defer paying tax on their ESS interests until a deferred taxing point, commonly a liquidity event, the end of employment, or a maximum of 15 years, rather than being taxed at grant. The specifics depend heavily on how your scheme is structured (salary sacrifice arrangement, real risk of forfeiture, or disposal restriction scheme), and getting it wrong can mean a candidate faces a tax bill on paper gains they cannot yet access. This is genuinely not a place to guess: get advice from an accountant who has actually set up an Australian ESS before you make a specific promise to a candidate.

Putting a number on an offer

Start from the outcome you defined for the role (see the startup hiring playbook), benchmark cash against the closest comparable role you can find, and treat equity as a genuine, well-explained upside rather than a discount you are asking the candidate to accept. A candidate who understands exactly what they are getting, in cash, in equity, and in vesting terms, is far more likely to accept quickly and stay once they do.