A founding engineer is a paid early hire with a small equity grant. Not a co-founder, and not a generic first developer. If you're hiring a founding engineer in Europe, the part most guides skip is the legal shape of that equity: it depends on the country and, more than founders expect, on whether the person is an employee or a contractor. It sits in our series of Startup CTO guides: leadership, diligence and the first hires.
What is a founding engineer, and how is it different from a first hire, a CTO or a co-founder?
A founding engineer is one of the first technical people in the company, and owns the product build and the early architecture. They write most of the first production code and make the technology calls nobody else on the team is placed to make.
| Role | Pay | Equity | Decision rights |
|---|---|---|---|
| Co-founder | Often little or none early on | Founder-level stake | Shared control of the company |
| CTO | Salary | Larger grant than other hires, tied to employment | Technical strategy and, as the team grows, managing engineers |
| Founding engineer | Salary or contract rate | Small grant, usually options | Owns the build and early architecture, not company direction |
| Generic first hire | Salary or rate | Often none | Owns the tickets they're given |
The co-founder line is its own decision, with its own equity and board consequences, and co-founder versus paid hire covers it so this article doesn't have to. If your real problem is that you can't judge an engineer's work, that's a separate evaluation problem, and judging an engineer you cannot code-review deals with it. Here we assume you can get the hire assessed and want to get the offer right.
When does a startup need one rather than a contractor or agency?
You need a founding engineer when the product has open-ended technical decisions that will compound for years, and you want one person to carry the context in their head. Typical triggers sit between pre-seed and Series A: the prototype has to become a product, customers are asking for things the prototype can't do, or an investor wants to see who owns the technical roadmap.
A contract engineer is the better first step when the scope is bounded (a migration, an integration, an MVP with a clear spec) or when you aren't sure yet what you're building. You can start a contract in days and end it without a cap table conversation. The cost is context: a contractor who leaves takes their picture of the system with them, and you'll pay again to rebuild it.
Neither is permanent. Plenty of teams start with a contractor and convert, which is why the contractor-versus-employee question below matters.
How do option schemes work for a founding engineer in Europe?
There's no single European scheme. Each country has its own tax rules for employee equity, and they differ in who qualifies and when tax is charged. What follows describes the schemes at a high level. Confirm the current terms with local counsel before you put numbers in an offer letter.
What does Index Ventures' European guidance say about grant size and vesting?
Index Ventures publishes a guide to how much equity employees get and who gets it, and it's the best European-specific benchmark we found. It describes a four-year vest with a one-year cliff as typical, with monthly vesting after the cliff in the US and monthly, quarterly or annual vesting in Europe. It also says a typical CTO at Series A or B holds about 1% in the US and 0.7% in Europe, that European late-stage employees own roughly 10% of their company against 20% in the US, and that in Europe two-thirds of options go to executives.
Treat those figures as dated. The seed-stage benchmarks in the guide come from 2018 surveys, so they show the shape of the gap between Europe and the US, not today's market. Use them to calibrate, not to quote in an offer.
Index's companion piece, on which countries are favourable for stock options, rates the UK's EMI and France's BSPCE as better than US schemes and says Germany lags. That guide predates Germany's 2024 reform of its employee share rules, so the German verdict may no longer hold.
UK: EMI
Enterprise Management Incentives are the scheme most UK startups use. HMRC's manual says a participant has to be an employee of the company, required to work at least 25 hours a week or, if less, 75% of their working time. See HMRC's guidance on the EMI working-time test for the wording. Company-size and value limits apply and have changed recently, so check them with an adviser rather than a blog post.
France: BSPCE
BSPCE is France's founder-and-employee warrant scheme, and Index rates it, with EMI, as better than what is available in the US. It sits in the employee tax regime, which is the point that matters here: it's built for people on a French employment contract. Its tax treatment was changed in 2025 and adjusted again for 2026, so get the current position from an adviser before quoting a rate to a candidate.
Germany
Germany reformed its employee share rules from 1 January 2024 through the Future Financing Act's changes to §19a EStG, after years of being the market Index called out as lagging. If you're hiring a founding engineer in Germany, don't rely on older advice that treats German equity as a tax problem with no fix. Ask counsel what the reformed rules mean for your plan.
Poland
Bird & Bird's 2023 note on Polish stock options describes a qualifying employee stock plan run through a joint-stock company, with tax deferred until the shares are sold and then charged at 19%. The same note says the incentive-scheme rules don't apply to people who work for the company on a B2B contract, though it notes that views on this differ. That matters because many Polish engineers do. That article is from 2023, so check that nothing has moved.
Whichever country you hire in, your lawyer sets the terms, and the numbers in this section are context, not a template.
Contractor or employee: what happens to equity?
The US-centric guides we read don't cover this. The tax-advantaged schemes above are written for employees. EMI requires an employee who meets a working-time test. BSPCE sits in the employee regime. In Bird & Bird's reading, Poland's qualifying-plan rules don't cover B2B contractors. A nearshore engineer on a contractor agreement therefore usually gets a cash rate and no options.
You can still give a non-employee equity. It typically means an unapproved or virtual scheme, with tax consequences that differ from the approved ones, and it needs local advice before you promise anything. Don't write "plus equity" into a contractor agreement because it sounds fair.
The cleaner route for most teams is staged. Start with a contractor, and if the fit is right, convert the person to an employee, at which point a local scheme becomes available. HighCircl's permanent-hire buyout is 18% of annual gross, disclosed from the start, against an industry norm of 20-25%.
What should a founding engineer be paid in Europe?
We're not publishing salary ranges here. The European tables we found are secondary compilations with no stated method, and city-by-city numbers go stale fast. Use two or three recent offers from founders in your city and stage, or ask your investors.
US guides tell founders to pay below-market cash and make it up in equity. We found no European source that documents the same norm. Index's data points the other way for the equity half, with smaller grants in Europe than in the US, so a candidate has less upside to trade cash for. Don't assume a discount will be accepted.
How do you assess a founding engineer?
Look for four things: ownership, product judgement, comfort with ambiguity, and range. The title matters less than whether the person has taken something from vague idea to running in production and can explain what they'd do differently.
A take-home that mirrors real work shows how they scope and trade off under constraints. Then a live session where the candidate defends their own work shows whether they understand what they built. It tests architectural reasoning, which is what you're hiring for. Reference calls come last, and ask what the person owned, not what their title said.
If you can't judge the technical answers yourself, bring in someone who can for the review stage, and keep the decision as yours.
Hiring a founding engineer through HighCircl
HighCircl sends a shortlist of three to five senior engineers within 72 hours, drawn from seven European countries. About 1 in 10 applicants pass its four-stage vetting, run by senior engineers. Rates are €45-105/hr ($50-115/hr), with a 20% margin, capped, on top of what the engineer earns. There's no subscription, no recruitment fee and no minimum hour commitment, and if the engagement isn't working, HighCircl replaces the engineer at no additional recruitment cost. See the founding engineer hiring page.
FAQ
Is a founding engineer a co-founder?
No. A founding engineer is hired, paid and given a small grant, and doesn't get the founder-level stake or control that comes with the title. Some companies do bring in a technical co-founder instead, and that's a different decision with different consequences.
How much equity should a founding engineer get?
Sources disagree, and we found no recent European benchmark. Index Ventures' guide, published around 2018, puts a typical CTO at Series A or B at 0.7% in Europe against 1% in the US, so a founding engineer should expect less than that. Ask your investors and your lawyer what comparable companies in your country are granting now.
Can a contractor get equity in Europe?
Possibly, but not through the usual tax-advantaged schemes, which are written for employees. It typically needs an unapproved or virtual arrangement and local advice. Converting the contractor to an employee is the simpler way to put them on a standard scheme.
What are EMI and BSPCE?
EMI is the UK's tax-advantaged option scheme for employees of qualifying companies. BSPCE is France's warrant scheme for employees of qualifying French companies.
Do I need a founding engineer or a fractional CTO?
A founding engineer builds. A fractional CTO gives you technical leadership a few days a week, not build capacity. If you need the product written, hire the builder. If you already have someone building and need decisions and hiring judgement, hire the fractional CTO.
Can a founding engineer be nearshore?
Yes. The practical limits are time zone overlap and, for EU companies, GDPR. Because the equity schemes above are employee-only, a nearshore contractor will usually be paid in cash, so budget for that.