15 ms·

Analyzing the monetary component of employee benefits at leading US startups

79 points by gingerjoos 10y ago

spcelzrd 10y ago
The article attempts to define it, but he word "generous" here is a little vague. If I'm making above market rate in salary, I don't really care about 401k match. At a previous employer, I had five weeks of vacation. Salary was lower than what I made when I left, but I valued the extra time off more.
- CydeWeys 10y ago
  Money in a 401(k) is tax-advantaged, so it counts for more than an equal amount in salary. In addition to match, other factors that matter a lot (but are harder to find out up front) include what funds are available and if after-tax contributions are allowed. Having access to low-cost funds is a huge plus, and after-tax contributions allow for the mega-backdoor Roth 401(k) strategy.
  - spcelzrd 10y ago
    I agree that a 401k match is better than the equivalent salary. Match is often a company policy and non-negotiable. Salary is negotiated per individual and usually more than once over the lifetime of a job, so it's easier to get more salary than more retirement match. It's the pingpong tables that kill me. Why does this make me want to work there?
    - madcaptenor 10y ago
      Ping-pong (foosball, etc.) tables make me less likely to want to work somewhere. At an old job the foosball table was near my desk. Whatever little amusement I got from playing foosball was dwarfed by the annoyance of other people playing foosball while I was trying to work. Ping-pong would be worse because I'd be trying to get things done while balls are flying through the air near me.
      - Cerium 10y ago
        I used to work with an old engineer who said that every company he worked for that had a ping-pong table has closed up shop in the years since.
  - officelineback 10y ago
    Also nice is the in-service rollover, so you can roll funds directly from the company's 401(k) plan into your self-directed IRA or whatever multiple times per year, instead of when you leave.
    - CydeWeys 10y ago
      Good point. Another nice option is the ability to roll over an existing roll over IRA into a 401(k) -- not all plans have this option. This is important because having basis in an IRA negates a lot of the advantage of doing a backdoor Roth IRA, but if you can move all of those IRA funds into your 401(k) without any tax consequences, then you're golden. Note that 401(k)-to-401(k) rollovers are generally always allowed.
- bradleyjg 10y ago
  > I don't really care about 401k match. That doesn't make any sense. Even if you value retirement savings at zero, you can withdraw as soon as the match hits with a 10% penalty. Matching is free money.
  - spcelzrd 10y ago
    Sorry if that was unclear. I do value retirement savings and understand the advantage of a pre-tax retirement contribution. What I mean to say is that salaryX + 3% 401k match is not as valuable as salaryX + 50% salaryX with no 401k match. The extra salary you need to ignore a lack of 401k can be debated, but at some salary, I just don't care.
    - brianwawok 10y ago
      The nice part about the match is it let's you get past the 401k contribution limit. YOU can only contribute something like 18k to your 401k, but your total 401k contribution can be much higher (~50k). So if YOU hit your 18k limit, the match is free 401k that you cannot get in another way.
hamstercat 10y ago
It's hard to generalize without having the complete employee data that companies mostly keep private. Less salary could come with more vacations, a pension plan, better insurance coverage, or other perks. Even when job shopping, it can be hard to compare different compensation packages fairly. In the end though, it's all about negotiating (or lack thereof) your starting salary and knowing how much you're worth in the current market. I found it eye-opening when I discovered that your salary is based mostly on your starting salary and not how well you do in your job.
WhiteSource1 10y ago
Very true. I know a lot of people who work at Mobileye (which Intel is purchasing for several billion dollars). They aren't allowed to leave the office for lunch.
- mbillie1 10y ago
  The amount of abuse and low-quality-of-life we'll put up with in exchange for the fantasy of becoming rich is shocking. It's like buying scratch off lottery tickets for "intelligent professionals."
  - watwut 10y ago
    I don't think it is just money. I think that many of startups sell themselves to employees via "we are special and superior" feeling. That is way it works best when their employees don't socialize outside of work due to long hours. It is the same in games industry: people like the sound of "I am working on a game", so they put up with worst conditions and pretty much any position - interesting or not.
- adekok 10y ago
  I don't think that's legal.
  - itg 10y ago
    I've seen this behavior at work environments. It's not explicitly enforced, but if nobody else is leaving the office for lunch, then you don't want to be seen as one who does. Also works with staying late at the office, weekends, etc.
    - watwut 10y ago
      And then sometimes someone goes out for lunch and nothing bad happens. If the management are not psychopaths, it might be worth trying. I understand how social pressure works and that there might be punishments for breaking unstated rules, but oftentimes someone has no choice, don't give a fck or is asperger enough not to get it aaand nothing bad happens. Assumes you are not slacking the rest of the time obviously.
m23khan 10y ago
For some reason, our generation (GEN Y / Millennials) don't seem to care much for their pensions or retirement planning. I think personally it is because of our atttitude towards retirement planning that majority of the companies today offer either no pension or almost-entirely employee-funded direct contribution based pension system. My Dad drilled one concept into my head in my early days of career - everybody gets old and every old person wish to retire with pension. I don't exclusively rely on my employer's pension plan for my retirement planning -- on top of it, I contribute to my state defined (bank managed) retirement funding.
- adekok 10y ago
  > For some reason, our generation (GEN Y / Millennials) don't seem to care much for their pensions or retirement planning. I don't think the average American is any different. http://www.cnbc.com/2016/09/12/heres-how-much-the-average-american-family-has-saved-for-retirement.html http://www.cnbc.com/2016/09/12/heres-how-much-the-average-am... Nearly half have no retirement savings at all.
- ysavir 10y ago
  Probably pre-occupied with paying off all of our debt.
- acdha 10y ago
  I think you have the cause reversed: I frequently hear millennials express interest in retirement planning but it's usually couched as an impossible dream after paying off student loans, housing, healthcare, etc. with jobs which are on average lower paying and less secure than even the previous generation. Pensions sound great but how many jobs offer them at all now, and with the financial stability to make that a safe long-term bet?
- douche 10y ago
  We don't think that we'll live long enough to collect a pension. Social Security will be unfunded long before we ever get a chance to draw from it.
  - 10y ago
ysavir 10y ago
Proper title: Highly valued startups aren't generous employers (when viewed along a single axis)
kazinator 10y ago
Health benefits for recurring or elective items are financially stupid. You're just throwing money into the coffers of some big insurance firm. For every dollar of routine dental work performed, you're paying a dollar fifty. Same with recurring drug costs, massages and things like that. Insurance is a structure for unforeseeable events. When it handles routine stuff, it's just an unnecessary middleman taking a fat slice. You'd be crazy to buy into a de luxe health plan by yourself if you're self-employed. I go for something minimal: no drugs or routine dental, just emergency dental and medical: for situations you pray won't actually happen. It's so much cheaper to just pay for the massage or to have a cavity filled, it's not even funny.
- closeparen 10y ago
  My employer pays all but a token amount of my premiums ($5) and my copays are also token fees ($20 for an office visit, etc). I basically don't think about healthcare as a financial item. If instead my employer decided to give me the money directly, my marginal tax rate would take roughly half of it. The existing system works really well for well-compensated employees, and we vote. That's probably why it's been allowed to be on fire for everyone else for so long.
- koolba 10y ago
  > You'd be crazy to buy into a de luxe health plan by yourself if you're self-employed. I go for something minimal: no drugs or routine dental, just emergency dental and medical: for situations you pray won't actually happen. +1 to this entire concept. Insurance is for dealing with catastrophes. Not to cover an annual physical or dental cleaning.
  - xienze 10y ago
    > Insurance is for dealing with catastrophes. Not to cover an annual physical or dental cleaning. Correct, and that's why we're in the situation we're in today. Insurance turned from, well, insurance into a bizarre discount club. The real solution to the high price of medial procedures and prescription drugs is to do away with insurance (as we know it today) and normalize paying out-of-pocket for procedures and drugs like we did so many years ago, and still do for car-related expenses. I have no doubt that if the auto insurance industry worked the way health care insurance worked a routine oil change would cost $3000 and the out-of-pocket expense would be anywhere from $30 to $200 depending on how good your coverage is. But fortunately for us, that industry can't obfuscate prices and consumers are informed and can shop around. And the prices stay sane. Funny, that.
nottorp 10y ago
I liked the clickbait title, why did it get changed to something more neutral :(
jeffwilcox 10y ago
Super surprised to see that tech employees aren't funding their 401K the full $18,000 per year. :(
- enraged_camel 10y ago
  The conventional wisdom is to first max your 401k up to your employer's match, then max your Roth IRA contribution if you're eligible. After that, the optimal savings path depends on your priorities.
  - linkregister 10y ago
    Any reasonably good employer-offered 401(k) plan will include a Roth option.
  - closeparen 10y ago
    If you're living in a high COL city for work, a Roth seems silly. My marginal tax rate (keeping roughly 55% of my bonuses) is decidedly out of whack with my standard of living (barely affording a 1BR). I'll do whatever I can to tax-shelter money in this environment. In retirement, I can raise my standard of living while halving my spending by relocating to somewhere that's not a high-end job center. That would mean a much lower income tax bracket.
    - enraged_camel 10y ago
      Whether you put money in a Roth account (Roth IRA or Roth 401k) depends on your future earnings potential. If you think you will earn more in the future than you do today, it makes sense to contribute to a Roth. The reason is that you pay less taxes now than you will in the future, and money inside Roth accounts grows tax-free. I don't quite understand how your current city's cost-of-living factors into this equation. At the end of the day your investment choices are primarily governed by your income tax bracket now vs. in the future. This holds true regardless of whether you are planning to retire in a low cost-of-living city - which is something everyone should plan to do anyway regardless of the type of retirement account they have.
ryan606 10y ago
Company managers have a responsibility to consider numerous factors when designing a total rewards strategy (pay + benefits + career opportunities/work environment). Among these is to deliver rewards using as efficient a currency as possible. When the perceived value of a pay element (or benefit program or perquisite) exceeds the economic value, then a company should deliver more of the total reward opportunity using such currency. Many companies have determined that perquisites are valued more highly by employees than the economic cost to deliver such perks. (Same for the perceived value vs. economic value of equity compensation.) By "underweighting" employee benefits, perhaps companies are actually choosing to deliver their total reward opportunity more efficiently than those companies which have more "market competitive" benefit programs. Differentiation of HR strategy is not automatically wrong.
wflynny 10y ago
These charts are just bad data visualizations, the legends are uninformative, and this article is very light on commentary. While I can see how one could argue these support the author's brief conclusions, overall this looks like too simple and shallow of an analysis to say anything really valuable.
sjg007 10y ago
The deal is stock options, a 4 year vest and a clear IPO at the end. All of the companies doing/did well (tech wise) IPO'd < 10 years after founding. Amazon (3 years), Microsoft (9 years), Google (6 years), Facebook (8 years), Yahoo (1 year), Netflix (5 years). We may disparage Yahoo but the initial formula was right.

79 points by gingerjoos 10y ago

The article attempts to define it, but he word "generous" here is a little vague. If I'm making above market rate in salary, I don't really care about 401k match. At a previous employer, I had five weeks of vacation. Salary was lower than what I made when I left, but I valued the extra time off more.

CydeWeys 10y ago
Money in a 401(k) is tax-advantaged, so it counts for more than an equal amount in salary. In addition to match, other factors that matter a lot (but are harder to find out up front) include what funds are available and if after-tax contributions are allowed. Having access to low-cost funds is a huge plus, and after-tax contributions allow for the mega-backdoor Roth 401(k) strategy.
- spcelzrd 10y ago
  I agree that a 401k match is better than the equivalent salary. Match is often a company policy and non-negotiable. Salary is negotiated per individual and usually more than once over the lifetime of a job, so it's easier to get more salary than more retirement match. It's the pingpong tables that kill me. Why does this make me want to work there?
  - madcaptenor 10y ago
    Ping-pong (foosball, etc.) tables make me less likely to want to work somewhere. At an old job the foosball table was near my desk. Whatever little amusement I got from playing foosball was dwarfed by the annoyance of other people playing foosball while I was trying to work. Ping-pong would be worse because I'd be trying to get things done while balls are flying through the air near me.
    - Cerium 10y ago
      I used to work with an old engineer who said that every company he worked for that had a ping-pong table has closed up shop in the years since.
- officelineback 10y ago
  Also nice is the in-service rollover, so you can roll funds directly from the company's 401(k) plan into your self-directed IRA or whatever multiple times per year, instead of when you leave.
  - CydeWeys 10y ago
    Good point. Another nice option is the ability to roll over an existing roll over IRA into a 401(k) -- not all plans have this option. This is important because having basis in an IRA negates a lot of the advantage of doing a backdoor Roth IRA, but if you can move all of those IRA funds into your 401(k) without any tax consequences, then you're golden. Note that 401(k)-to-401(k) rollovers are generally always allowed.
bradleyjg 10y ago
> I don't really care about 401k match. That doesn't make any sense. Even if you value retirement savings at zero, you can withdraw as soon as the match hits with a 10% penalty. Matching is free money.
- spcelzrd 10y ago
  Sorry if that was unclear. I do value retirement savings and understand the advantage of a pre-tax retirement contribution. What I mean to say is that salaryX + 3% 401k match is not as valuable as salaryX + 50% salaryX with no 401k match. The extra salary you need to ignore a lack of 401k can be debated, but at some salary, I just don't care.
  - brianwawok 10y ago
    The nice part about the match is it let's you get past the 401k contribution limit. YOU can only contribute something like 18k to your 401k, but your total 401k contribution can be much higher (~50k). So if YOU hit your 18k limit, the match is free 401k that you cannot get in another way.

hamstercat 10y ago

It's hard to generalize without having the complete employee data that companies mostly keep private. Less salary could come with more vacations, a pension plan, better insurance coverage, or other perks. Even when job shopping, it can be hard to compare different compensation packages fairly. In the end though, it's all about negotiating (or lack thereof) your starting salary and knowing how much you're worth in the current market. I found it eye-opening when I discovered that your salary is based mostly on your starting salary and not how well you do in your job.

WhiteSource1 10y ago

Very true. I know a lot of people who work at Mobileye (which Intel is purchasing for several billion dollars). They aren't allowed to leave the office for lunch.

mbillie1 10y ago
The amount of abuse and low-quality-of-life we'll put up with in exchange for the fantasy of becoming rich is shocking. It's like buying scratch off lottery tickets for "intelligent professionals."
- watwut 10y ago
  I don't think it is just money. I think that many of startups sell themselves to employees via "we are special and superior" feeling. That is way it works best when their employees don't socialize outside of work due to long hours. It is the same in games industry: people like the sound of "I am working on a game", so they put up with worst conditions and pretty much any position - interesting or not.
adekok 10y ago
I don't think that's legal.
- itg 10y ago
  I've seen this behavior at work environments. It's not explicitly enforced, but if nobody else is leaving the office for lunch, then you don't want to be seen as one who does. Also works with staying late at the office, weekends, etc.
  - watwut 10y ago
    And then sometimes someone goes out for lunch and nothing bad happens. If the management are not psychopaths, it might be worth trying. I understand how social pressure works and that there might be punishments for breaking unstated rules, but oftentimes someone has no choice, don't give a fck or is asperger enough not to get it aaand nothing bad happens. Assumes you are not slacking the rest of the time obviously.

m23khan 10y ago

For some reason, our generation (GEN Y / Millennials) don't seem to care much for their pensions or retirement planning. I think personally it is because of our atttitude towards retirement planning that majority of the companies today offer either no pension or almost-entirely employee-funded direct contribution based pension system. My Dad drilled one concept into my head in my early days of career - everybody gets old and every old person wish to retire with pension. I don't exclusively rely on my employer's pension plan for my retirement planning -- on top of it, I contribute to my state defined (bank managed) retirement funding.

adekok 10y ago
> For some reason, our generation (GEN Y / Millennials) don't seem to care much for their pensions or retirement planning. I don't think the average American is any different. http://www.cnbc.com/2016/09/12/heres-how-much-the-average-american-family-has-saved-for-retirement.html http://www.cnbc.com/2016/09/12/heres-how-much-the-average-am... Nearly half have no retirement savings at all.
ysavir 10y ago
Probably pre-occupied with paying off all of our debt.
acdha 10y ago
I think you have the cause reversed: I frequently hear millennials express interest in retirement planning but it's usually couched as an impossible dream after paying off student loans, housing, healthcare, etc. with jobs which are on average lower paying and less secure than even the previous generation. Pensions sound great but how many jobs offer them at all now, and with the financial stability to make that a safe long-term bet?
douche 10y ago
We don't think that we'll live long enough to collect a pension. Social Security will be unfunded long before we ever get a chance to draw from it.
- 10y ago

ysavir 10y ago

Proper title: Highly valued startups aren't generous employers (when viewed along a single axis)

kazinator 10y ago

Health benefits for recurring or elective items are financially stupid. You're just throwing money into the coffers of some big insurance firm. For every dollar of routine dental work performed, you're paying a dollar fifty. Same with recurring drug costs, massages and things like that. Insurance is a structure for unforeseeable events. When it handles routine stuff, it's just an unnecessary middleman taking a fat slice. You'd be crazy to buy into a de luxe health plan by yourself if you're self-employed. I go for something minimal: no drugs or routine dental, just emergency dental and medical: for situations you pray won't actually happen. It's so much cheaper to just pay for the massage or to have a cavity filled, it's not even funny.

closeparen 10y ago
My employer pays all but a token amount of my premiums ($5) and my copays are also token fees ($20 for an office visit, etc). I basically don't think about healthcare as a financial item. If instead my employer decided to give me the money directly, my marginal tax rate would take roughly half of it. The existing system works really well for well-compensated employees, and we vote. That's probably why it's been allowed to be on fire for everyone else for so long.
koolba 10y ago
> You'd be crazy to buy into a de luxe health plan by yourself if you're self-employed. I go for something minimal: no drugs or routine dental, just emergency dental and medical: for situations you pray won't actually happen. +1 to this entire concept. Insurance is for dealing with catastrophes. Not to cover an annual physical or dental cleaning.
- xienze 10y ago
  > Insurance is for dealing with catastrophes. Not to cover an annual physical or dental cleaning. Correct, and that's why we're in the situation we're in today. Insurance turned from, well, insurance into a bizarre discount club. The real solution to the high price of medial procedures and prescription drugs is to do away with insurance (as we know it today) and normalize paying out-of-pocket for procedures and drugs like we did so many years ago, and still do for car-related expenses. I have no doubt that if the auto insurance industry worked the way health care insurance worked a routine oil change would cost $3000 and the out-of-pocket expense would be anywhere from $30 to $200 depending on how good your coverage is. But fortunately for us, that industry can't obfuscate prices and consumers are informed and can shop around. And the prices stay sane. Funny, that.

nottorp 10y ago

I liked the clickbait title, why did it get changed to something more neutral :(

jeffwilcox 10y ago

Super surprised to see that tech employees aren't funding their 401K the full $18,000 per year. :(

enraged_camel 10y ago
The conventional wisdom is to first max your 401k up to your employer's match, then max your Roth IRA contribution if you're eligible. After that, the optimal savings path depends on your priorities.
- linkregister 10y ago
  Any reasonably good employer-offered 401(k) plan will include a Roth option.
- closeparen 10y ago
  If you're living in a high COL city for work, a Roth seems silly. My marginal tax rate (keeping roughly 55% of my bonuses) is decidedly out of whack with my standard of living (barely affording a 1BR). I'll do whatever I can to tax-shelter money in this environment. In retirement, I can raise my standard of living while halving my spending by relocating to somewhere that's not a high-end job center. That would mean a much lower income tax bracket.
  - enraged_camel 10y ago
    Whether you put money in a Roth account (Roth IRA or Roth 401k) depends on your future earnings potential. If you think you will earn more in the future than you do today, it makes sense to contribute to a Roth. The reason is that you pay less taxes now than you will in the future, and money inside Roth accounts grows tax-free. I don't quite understand how your current city's cost-of-living factors into this equation. At the end of the day your investment choices are primarily governed by your income tax bracket now vs. in the future. This holds true regardless of whether you are planning to retire in a low cost-of-living city - which is something everyone should plan to do anyway regardless of the type of retirement account they have.

ryan606 10y ago

Company managers have a responsibility to consider numerous factors when designing a total rewards strategy (pay + benefits + career opportunities/work environment). Among these is to deliver rewards using as efficient a currency as possible. When the perceived value of a pay element (or benefit program or perquisite) exceeds the economic value, then a company should deliver more of the total reward opportunity using such currency. Many companies have determined that perquisites are valued more highly by employees than the economic cost to deliver such perks. (Same for the perceived value vs. economic value of equity compensation.) By "underweighting" employee benefits, perhaps companies are actually choosing to deliver their total reward opportunity more efficiently than those companies which have more "market competitive" benefit programs. Differentiation of HR strategy is not automatically wrong.

wflynny 10y ago

These charts are just bad data visualizations, the legends are uninformative, and this article is very light on commentary. While I can see how one could argue these support the author's brief conclusions, overall this looks like too simple and shallow of an analysis to say anything really valuable.

sjg007 10y ago

The deal is stock options, a 4 year vest and a clear IPO at the end. All of the companies doing/did well (tech wise) IPO'd < 10 years after founding. Amazon (3 years), Microsoft (9 years), Google (6 years), Facebook (8 years), Yahoo (1 year), Netflix (5 years). We may disparage Yahoo but the initial formula was right.