Building teams

Key questions on Salaries, PTOs & Perks — Part two

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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), as well as less standard elements of benefits packages that often go hand in hand with working in a high growth small business.

This blog is a continuation of part one.

Holiday & Paid Time off (PTO)

In the US there are eight Federal public holidays and four further regional holidays 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”). The employer is obliged to pay employees for earned and unused PTO when they retire or leave the company. In 2010 $65bn in Holiday Liability was accrued by Public US companies alone, equating an average of $2k per employee. Keep this in mind when thinking about PTO policies, as there are potential legal consequences if PTO is not tracked appropriately.

Netflix was arguably the first company to offer “unchecked” holidays starting in 2010 but increasingly for many startups, an “unchecked”/unlimited holiday allowance is very common. This approach deals with the Holiday Liability issue, reduces the complexity of tracking holiday allowances and 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 suggests that this approach is most common in San Francisco area and in 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 individual states in the US.

  • 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 parental 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 returning to work. At Google, when paid maternity leave increased from 12 to 20 weeks, attrition dropped by 50 per cent.
  • Optimizely completed an analysis on how much it costs a company to offer a more generous parental leave package. It came to the conclusion that it was effective in retaining talent and cost the equivalent of $1.6k across every employee (in a 400-person company) to offer a 17-week maternity package.
  • 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 kept 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. If employees will be doing something “adventurous” in their vacation, they are provided £250, in order to incentivize 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, etc. (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 send us your thoughts on the above and to highlight your own experiences if these differ from what we share. Alternatively email me or Alliottdirectly.

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.

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