I have been the first human resources leader at two successful startups. In both instances, I’ve built the human resources function and people teams from the ground up.
Doing this from scratch means you have to consider everything, from compliance to compensation. Often, processes and procedures just fell into place before I joined, so it was my job to evaluate whether they made sense.
One of the most complex and interesting topics I tackle is employee benefits packages. It’s a subject that comes up often at startups that want to ensure they have a competitive edge when it comes to hiring and retaining talent.
However, it’s also been known to get out of hand, and with startups tightening their budgets, I believe we’ll start to see benefits changing drastically in the coming months.
Founders need to ask themselves what really matters to their business, and which benefits best align with their cultural values.
Virtually every company will have its own take on what should be offered to employees, so founders inevitably struggle with what makes the cut (and what doesn’t). There’s no “one size fits all” benefits package, and nor should there be, as each company has its own objectives and goals.
Here are four aspects for founders should consider when building benefits packages:
Focus on what matters most to your people
It’s imperative that startups should not try to match what other technology companies are offering. It’ll be impossible to offer every flashy new perk that you come across, or provide extravagant packages like Google or Facebook.
For example, Netflix offers unlimited parental leave, which is incredible, but for an early startup, offering this would be daunting and difficult.
It’s better to focus your attention on what matters most to your people. This is especially important in today’s economic climate. Offering “all the things” isn’t necessarily going to make employees happier, and it certainly isn’t going to help your runway or bottom line.
Build your benefits philosophy around your values
Founders need to ask themselves what really matters to their business, and which benefits best align with their cultural values.
You can easily find benefits that can map to everything from empowering women and supporting working parents, to promoting work-life balance and fostering continuing education. But unless you have endless cash on hand indefinitely, you can’t provide them all.
For example, Airbnb wants to promote travel and adventure, so they offer employees $2,000 a year for vacations. Before you match that, ask yourself if a travel stipend aligns with your main values.
Recognize who you’re excluding
Almost everyone can take advantage of healthcare benefits and vacations, but when you provide fringe benefits, you’re likely only serving a subset of employees and excluding others.
For example, egg freezing is an expensive benefit that might only support one employee, but a company can decide that the huge impact of helping a small number of people makes it worthwhile.
As long as you’re being intentional with your decisions, it’s okay to acknowledge that not every benefit will help every employee.
Budget and forecast for sustainability
One of the worst mistakes you can make is offering a great benefit, and then taking it away because the company can no longer afford it. Similar to when a company needs to lay off staff, this is a negative signal for employees and morale.
Plan ahead so you can avoid such situations. Ensure you’re working with a good partner that can help you forecast and understand the financial impact of each benefit.
Working in step with finance teams is also crucial. Everyone should be aligned on budgets not only for the year, but for the long term.
After you’ve come up with a package that works for your business, you’ll want to know if it’s working. There are obvious indicators like utilization, which means if people are using the benefits, they must like them and it makes sense to continue to offer them. If they aren’t, then maybe consider adjusting your offerings. However, it’s not always that simple.
There are also deeper ways to understand the value and ROI of your plan, including employee surveys or feedback sessions that you can conduct once a year. Companies should also consider candidate closing and retention rates, and examine whether changes to benefits have impacted either. To take it a step further, if a candidate declines or accepts an offer, it can be useful to find out if benefits played a role in their decision.
At the end of the day, the right benefits package can be a huge differentiator for any startup. It’s worth giving it the time and attention early on, even before your first HR hire.