Trustpilot: The global fight for talents slows down growth

In the recruitment of sought after global talents, Danish startups see themselves forced to spend capital otherwise set aside for growth. As it is today, the startups can offer new employees nothing but high salaries as shares are economically unfavorable. So says Anne Marie Finch, Senior Vice President for Global HR and Talent in Trustpilot.

Worldwide, employees of startups are often given a low basic income. Instead they are granted with shares of the company. This both works as an incentive, as employees suddenly have a personal interest in making the business a success, as well as it releases essential capital for the company to spend.

Because rapid growth calls for capital and to pay out high salaries limit the possibilities for investments and global expansion.

However, Danish startups have little choice. Due to the Danish taxation regulation, shares given to employees are subject to a 57% tax. However, if the foreign employee qualifies, Danish startups can offer a so called research scheme, meaning the taxation of salaries in the first 7 years of employment will be lowered to 27% – or, due to the labor market contribution, 32%.

Because rapid growth calls for capital and to pay out high salaries limit the possibilities for investments and global expansion.

Despite this possibility, the taxation system overall fails to meet the startups needs. For still developing businesses, salaries must be kept low in order to spend available capital for growth. As a result, startups would preferably like to pay their employees in shares of the company, which they later on can earn a profit from by selling.

However, when this profit is diminished significantly due to taxation, it becomes hard to attract skilled foreign labor to Denmark. As a consequence, Danish startups are at risk of being left behind in the global race for talents, subsequently leading to both loss in economical growth and the creation of jobs.

Tax on shares is an obstacle for recruitment

The warning comes from Anne-Marie Finch, Senior Vice President for Global HR and Talent in Trustpilot, which, despite the odds, today is one of Denmark’s leading companies in growth. In 2014, when Anne-Marie Finch herself joined Trustpilot, the company had 250 employees in total. Today, its counts more than 600 and expects to employ additionally 100 by 2018. In other words a growth many startups can only envy.

Despite this possibility, the taxation system overall fails to meet the startups needs. For still developing businesses, salaries must be kept low in order to spend available capital for growth.

Due to a growing, global reputation, attracting global talents to Trustpilot is no longer a major obstacle. However, despite of the company’s scale-up position, problems still arise whenever new employees are recruited for the headquarters in Copenhagen:

“At the moment I am working on the contracts for some very skilled people who we would like to see join Trustpilot. And I happily tell them about the tax scheme for researchers. But it’s a shame when I have to explain the taxation on shares. If we have to offer high salaries in order to attract the tech talent needed, it has consequences for the capital otherwise set aside for growth and investments. This is a major challenge for startups in Denmark,” says Anne-Marie Finch.

The mission of finding talents

Over the years, the search for talents has become easier, tells Anne-Marie Finch. Trustpilot has especially succeeded in catching the interest from skilled entrepreneurs who themselves have had startups growing big. But also talents from larger, established companies on the lookout for more flexibility and creativity are willing to join.

“IT-development is a creative business, and by now we are privileged to have a product people know. This is why we are less challenged today,” she says.

Trustpilot’s workforce is divided between Copenhagen, Vilnius, London, Denver, New York, Berlin and Melbourne. Last year alone, 300 new employees joined the company. The recruitment process involves well over 20 people in the HR department, each one having a very specific job to do. Like Jack, who specializes in finding talents in Norway, France and Italy and to make them onboard the headquarters in Denmark. Or Inga from Vilnius whose main focus is to find IT developers for the offices in both Lithuania and Copenhagen.

Sustaining the work culture is key

Trustpilot’s success in attracting talents is partly due to their own strong pipeline. Moreover, the company rarely uses external recruitment bureaus to track down relevant talents.

“We have really found some value in inhouse-recruitment. To have skilled people communicating our work culture is extremely important when hiring. When expanding globally, we continuously have to secure that our current work culture is sustained. Without our specific work culture we would be like any other company. It is the work culture which is the main draw for new employees,” says Anne-Marie Finch.

Whenever a recruitment of an employee proves to be a mistake, the costs amount to DKK 1.3 million. Considering last year’s total of 292 new employees, a hiring process can quickly become costly. A well functional HR department is thus absolutely vital. Moreover, every year the board approves on the coming year’s plan for recruitments, adjusted in accordance with possible leaves.

To keep a spirit of entrepreneurship

Whenever a recruitment of an employee proves to be a mistake, the costs amount to DKK 1.3 million. Considering last year’s total of 292 new employees, a hiring process can quickly become costly. A well functional HR department is thus absolutely vital.

In Trustpilot, the search for talents moreover often involves mobilizing the network of already existing employees, who get to suggest possible candidates. Of those, well over 30% end up with a contract and it has proved to be a successful way to keep a spirit of entrepreneurship despite the companies growing size.

Though Trustpilot no longer describe themselves as a startup, the questions of recruitment costs and salaries remain to be relevant.

“It is extremely important that the money is not only spent on high salaries. We are to conquer the whole world and we are doing so. But growth calls for capital and success is in no way guaranteed. It also takes talented people and the problem arises when their incentive in terms of shares disappears due to taxation,” says Anne-Marie Finch.