There can be substantial differences in tax ramifications/liabilities
(for both startup and employee), but I'll leave that to the accounting/legal/tax planning folks. As such, I'd say (arbitrarily) it's a 40% ops/hr decision, 30% tax, and 30% legal.
Since your objective is to hire + retain (aka induce), it really comes down to understanding what your potential employee wants. Some people have been burned by the equity option and only want to see cash (deferred or as earned) while others are adventurous or truly believe in the startup. Some have families and are looking for 9 to 5. Others are willing to do 8 to midnight. Some just want the chill culture with ping pong tables and dart boards, and other the immersive small team experience with rapid potential for climbing the ranks, scaling the startup, and contributing substantially. Some just want a voice, rather easily lost even in a 20 person team. One things is consistent across the board - most people don't know what equity truly entails let alone liquidation prefs.
To oversimplify this mathematically, the equity option, E, can be weighted by 0.05 as only 5% of startups succeed. So a 50/50 salary/equity compensation is now worth 50/2.5. However, the 2.5 can be reweighted possibly by average exit/valuation multiple multiplicatively or adjusted exponentially. Ben West does a better job of number crunching here
I've been told a hundred times that cash is expensive upfront, yet equity is expensive later on. Having seen equity go to zero, it's really only worth what you and the team make it worth + investment trends and hype cycle + round valuation + product market fit + some luck. To put this all into perspective, we're in a period where we've had absurd valuations and we're seeing downrounds of unicorns and plebeians. As a decision scientist, I'd suggest taking 25 use cases to see how valuations, markets, liquidation preferences, dilution, and a number of other factors play out.
But theory aside, empirically, I've seen a greater draw to workplace culture, innovation, and cross-training + immersion at a sacrifice to pay and corporate lifestyle, so it ultimately comes down to the people you're looking for and what they want.
Having been brainwashed in clarity --> objectives --> execution, I find it difficult to put together a compensation plan without knowing what the target demographic wants. A better offer
can easily be the latter of camaraderie and flexibility over heaps of deferred compensation and equity.
Personally, it would be tough to induce me with a seven-figure equity plan ever again, but then again, I just jumped on a riveting new project without discussing any form of equity or compensation despite constantly advising others to settle the details early.