Equity replacing wages in an echo of the employment trends seen during the dot com boom

More than three quarters of IT professionals joining Web 2.0 startups are sacrificing up to a third of their pay in return for shares, according to new research.

A survey by IT staffing company ReThink Recruitment found that two years ago, less than 10 per cent of IT workers joining new firms were prepared to accept equity in place of pay.

But the percentage of candidates now sacrificing salary for shares is close to the level during the peak of the dot com boom.

The survey found that employees of dot com startups have taken pay cuts of as much as a third to become permanent employees who will gain equity on a takeover or flotation.

The equity method of remuneration was a way of securing talent which lost most of its value after the dot com crash, said Rethink Recruitment sales manager Nathan Callaghan

“Recruitment was difficult for startups as they didn’t have the cash to compete with the big companies,” he said.

But many of those who accepted equity ended up with nothing after inflated company valuations led to the dot com crash.

IT companies now regularly reorganise and restructure their workforces, so candidates don’t really see startups as that much more risky than blue-chip employers, said Callaghan.

“Web startups are bucking the trend in the rest of the market. It’s just about the only area right now where people are leaving contracting to go permanent. Elsewhere the opposite is true,” he said.