Benefits as a Percentage of Salary

One of the strategies we employed at Pardot was taken right out of the Google playbook: lavish employees with great benefits. Internally, we focused on providing benefits that were in the 99th percentile of all companies and salaries in the 60th percentile. People would always comment, “your benefits must be crazy expensive — we can’t afford those because we’re a startup.” It’s true that our benefits became more robust as we went from the early stage to the growth stage, but we still had strong benefits as soon as we could afford them.

One of the ways I like to think of benefits is in relation to salary. Let’s say these are the main benefits per person:

  • Health Insurance – $5,000/year
  • Dental Insurance – $600/year
  • Short and Long Term Disability – $600/year
  • 4 Hours of Housecleaning Per Month – $1,200/year
  • Catered Lunches – $2,400/year
  • Snacks and Drinks – $1,200/year
  • Total – $11,000/year

Let’s assume the average salary is $80,000/year across all job functions. At $11,000/year for benefits, that’s roughly 14% of the average salary. We found that amazing benefits translated into stronger loyalty, more frequent employee referrals, and a better working environment. While these benefits might seem expensive, they were incredibly valuable to us.

What else? What are some other thoughts on benefits as a percentage of salary?

4 thoughts on “Benefits as a Percentage of Salary

  1. What about other benefits such as equity, profit sharing and 401k, along with any pro environmental programs? At Blinq, we used to also sponsor breakfast at the incubator’s food nook in our NYC office, plus had board games for programmers to play at lunch.

  2. One benefit that has had a great motivating effect on me and many I know at my employer (MSFT) has been a volunteer match (non-profits where employees spend time get $25 for every hour employee spends). Though this is not a % of an individual’s salary, it’s a great benefit that also inspires ppl to give back.

  3. David — Thanks for sharing. We are working and trying to make our benefits packages amazing. I have a few questions. Did you grant all of those benefits at the hiring letter stage (hence you formalized such provision) or for some (ie house cleaning, catering food) you provided them “informally” as the relationship matured? If you grant them formally, any of them, what is the relation between those and the taxation rules that may apply? Are all of them considered as additional compensation to the employee?

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