Wednesday, October 1, 2008

Tech company benefits

Employers can be short-sighted and stingy with benefits. In the back of my mind, I've always kept the ambition that some day I would start my own software business. I'd like to think I'd be more enlightened. It's not about generosity in and of itself; I think that generous benefits can be a significant competitive advantage in the marketplace for talent. That makes it easier to get the best people and make sure they stick around. So far, I've come up with a list of ideal benefits I'd like to see:

  • 4 weeks of vacation per year at start, with 6 weeks available for those who have been around for a while.

  • 2 weeks of personal/sick time per year.

  • Fully paid health insurance premiums for employee and spouse.

  • 401(k) contribution of 5% no matter what the employee does, with matching of another 5%

  • A severance fund created the moment an employee starts. This fund would have 2 months of salary in it. If the employee is terminated without cause, such as in a layoff, they get the whole thing. If the employee is terminated with cause, they get 2 weeks. I don't know what to do in the case of the employee leaving by choice; I'm wavering between giving half and giving nothing. The important thing is that the money would be funded (using, say, TIPS) as soon as the employee started. That way, no matter what happened to the company, the employee wouldn't be left in the lurch.

  • 3 months fully paid paternity leave - it would be half pay for 3 months, with the balance paid out after the employee has been back on the job for a while, perhaps 9-12 months. If the employee quits before then, he doesn't get it. I've seen too many people take excessive advantage of this kind of benefit.

  • 4 months fully paid maternity leave - same conditions.

  • 4 day work weeks (maybe)

I have only a rough idea what this would cost. I think the vacation, sick time, and shortened work week would be free. People would be at work less, but more effective when they were around. The severance fund is less pricey than it looks; severance is normal, and this only differs in the quantity and the timing of the funding. The parental benefits would be expensive, but would only apply to some of the employees some of the time. I expect this would add 25%-40% to payroll costs on an annual basis. My hope is that these benefits would drastically reduce turnover and make hiring much easier. Vacancies are expensive, as is filling them. I haven't run the numbers, but my gut says it's the right thing to do. Hopefully, one day I'll get the chance to test this, and I'll end up being right.

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