Launching in the US: Salaries, PTOs & Perks – Part two

This blog is part two of the two-part series providing information on US salaries and compensation benchmarks and what is expected in terms of holiday or Paid Time Off (PTO).

When to think about this?

Even when building a speculative US budget, it is helpful to have a basic awareness of US salaries and compensation benchmarks and what is expected in terms of holiday or Paid Time Off (PTO). Whilst addressing these areas in this blog we have also included some less standard elements of benefits packages that often go hand in hand with working in a high growth small business. Hopefully these will give a sense for the variety and somewhat colourful range of benefits open to companies looking to create a specific culture beyond the more formal elements.

This blog is best read alongside part one which can be found here.

Holiday & Paid Time off (PTO)

In the US there are eight Federal public holidays and four further regional days’ holiday but there is no Federal requirement for companies to offer paid holidays under the Fair Labour Standards Act. The average number of days’ paid holiday for a traditional private company is 10, with many companies giving additional days’ holiday as an employee remains with the company up to a cap of approximately 15 days.

In the US, employees can typically accrue unused days holiday (“Holiday Liability”). Where workers have earned and unused PTO, the employer is obliged to pay employees this when they retire or leave the company. In 2010 $65bn in Holiday Liability was accrued by Public US companies alone equating an average to $2k per employee. This should be borne in mind when thinking about PTO policies and potential legal consequences if PTO is not tracked appropriately.

Netflix was arguably the first to offer “unchecked” holidays starting in 2010 but increasingly for many startups, “unchecked”/unlimited holiday allowance is very common. This approach deals with the Holiday Liability issue, reduces the complexity of tracking holiday allowances and actually, there is a lot of evidence to suggest that this does not result in any increase in the number of days of holiday being taken. Some research would however suggest that this approach is most common in San Francisco, and the most competitive recruiting markets, rather than a general trend.

Maternity Leave policies in the US differ to the UK and there are many differences between states.

• There is no Federal requirement to offer paid Maternity Leave. Under the Family and Medical Leave Act 1993, employers must offer 12 weeks of unpaid leave for women who worked 1,250 hours during the prior year for a company that employs 50 or more people.
• Only four States have publically funded paternity leave (California, New Jersey, Massachusetts and Rhode Island). California offers new mothers up to six weeks, at 55 percent of their salary. New Jersey offers six weeks at two-thirds of salary. Rhode Island pays four weeks at 60 per cent (see Appendix links)
• A range of new legislation coming into force will require some States to offer a more benevolent package e.g New York to offer employer contributions from 2018
• Many tech companies offer between 6-17 weeks’ paid Maternity and/or Paternity leave.
• There are prominent examples of where a more liberal maternity leave policy has had significant impacts on the retention of staff once returning to work. At Google, when increasing Maternity leave from 12 to 20 weeks, attrition dropped by 50 per cent.
• Optimizely completed an analysis on how much it cost a company to offer a more generous maternity leave package. It came to the conclusion that it was necessary to retain talent and cost the equivalent of $2k across every employee to offer a 17 week maternity package.
• The situation with Paternity leave is even more varied between companies. Much of the previous legislation made references purely to mothers but the applicability of PTO to those looking to adopt or foster whether mother or father is also expected to increase.

Perks

Below are a selection of the Perks that we have come across in carrying out this research. Whilst many are offered by large and established businesses, as smaller businesses look to compete with such corporates for hiring, they should be borne in mind:

• Google and Palantir offer free financial advice from Wealthfront for employees earning under $100k
• AnyPerk offer employee recognition “cheques” which can be redeemed at many retailers
• One portfolio company offers untracked holiday allowance and for employees doing something “adventurous” in their vacation, they are provided with £250 in order to incentivise its employees to truly switch off and take a real holiday.
• One month unpaid leave after four years continuous service and one month paid sabbatical after eight years continuous service
• Threadless offers a white labelled own company Pale Ale which is always available from the staff canteen!
• Luggage party – all employees bring a suitcase to work and a set number of employees are selected at random to go on holiday for the weekend (Freeborn and Peters)
• Free personal trainer in the office once a week and staff can book 30 min slots (HZDG)
• Free concierge service including subscription to on-demand laundry and cleaning services
• Mandatory days holiday on their birthday
• A one off $4k “baby cash” sum paid on the arrival of a new child
• Continuing education – for staff that work more than 20 hours a week, Starbucks will cover the tuition fees for a BA at the University of Arizona
• Free transport and tickets to local sports matches and music events (Quicken Loans)
• Student loans re-imbursment. PWC offer $1,200 per year specifically for student loans repayments
• $500 personal growth budget to be used for items such as skydiving, yoga, skydiving (BBMG)

Key Challenges

• Think robustly about your location. The technology hub of San Francisco is very competitive and staff retention is challenging here.
• Consider using a set formula for calculating salaries. This ensures a consistent approach and limits the risk of inadvertently overpaying or underpaying some employees.
• Consider taking specialist advice or working with your PEO/benefits provider to address issues with PTO policy and what risk the company may be exposing itself to.

Where to go next

• Check out our Dropbox with a range of date on service providers
• State by state differences in maternity leave
• Project time off report – danger of work martyrs
• Best practice with PTO from Sequoia benefits
• Optimizely blog and downloadable spreadsheet to model cost of increasing Maternity leave
• Maternity policies from Google, Amazon & Microsoft
• Interesting article on the popularity of additional perks during challenging market conditions
• If you want to get specialist advice or more information on this topic, we would suggest speaking to Cara at Leave Logic regarding constructing a maternity/paternity policy

We hope this blog has provided a useful introduction to this area of US benefits. As you might expect, the US market is dynamic and evolving all the time, so we encourage all companies to take specialist advice to determine what is the optimal blend salary, PTO and perks to fit their needs and circumstances.

Please do you use the feedback button below to send us your thoughts on the above and to highlight your own experiences if these differ from the above! Alternatively email me or Alliott directly. 

Thanks to Mark & Jed at Sequoia Benefits, Gregory at Kranz Associates and Jon at Amplience for your help and guidance in pulling this blog together.

This blog and those in this series are aimed at helping entrepreneurs learn about the US market, what it takes to start here, and ultimately what it takes to succeed here. Many of the topics (if not all) are complex and it is best to view these blogs as a basic  introduction from which you the entrepreneur must triangulate to your own specific set of circumstances – and invariably it will be sensible and appropriate to seek third party professional advice.