November 20, 2020

What are the employee benefits typically offered at startups?

The following answer is from a Q&A I answers on Quora this year about what startups tend to offer on benefits.

What are the employee benefits typically offered at startups? Startups can cover enough ground to the extent that this list may vary. I would tell you that if a startup company is just getting started and has an employee count of 10 or less, basically the founding team plus a few more, you are likely to see the following:

Medical/Dental/Vision: This one is pretty basic, medical coverage is a foundational benefit. it is where every company begins when putting their benefits package together. Dental and vision are typically joined at the hip. As a function of cost dental and vision are a fraction of medical and are more often than not tied to the medical (dental moreso than vision). Most startups will have this as it begins to put a core team in place. What will vary will be the benefit level of plan and how much the company will contribute to the cost.

A couple of determinants of benefit level and contribution amount will be the nature of the startup and what kind of backing they have. If the startup is operating in an industry that is ultra competitive on talent such as software or biotech, the better the plan and the richer the contribution. If you are in a war for talent, you have to be able to attract and retain talented people, good benefits (especially medical) goes a long way on that.

Once a company hits a few benchmarks, maybe raises some VC money money or is getting some traction on revenue, the next set of benefits that come into play include:

Group Life/DI; Retirement Plan (maybe): Group life and disability will usually come into play pretty quickly. As with dental and vision, as a function of cost it is a relatively inexpensive benefit when compared to medical coverage. If a the founding team is made up of pretty senior members, or if some of the initial employees needed to be recruited, you will typically see this type of benefit put into place sooner rather than later.

A company sponsored retirement plan, such as a 401k will usually come into play on the next round of hiring. Once a company gets past 10 or 15 people such a plan is more likely to come into play. Initially such a plan would not include a company match, that would come a little further down the line.

What has been referenced so far can be described as the ‘basics’ and pretty much what one would expect at most companies. As we are talking about startups, you need to crawl before you can walk. The next level of benefits are a bit fringy and come into play after a startup gets some traction and more employees in the door.

FSA: Flexible Spending Accounts. These can be tied to medical plans as well as for other qualified expenses on a tax free basis

Retirement Plan Matching: A company sponsored contribution match toward a 401k, usually 3–4%

Voluntary Benefits: Optional benefits such as life insurance buy-ups through a group life insurance plan.’

Commuter Benefits: Especially useful in large metro areas where most of the workforce is using public transportation to get to and from work.

If you are reading this and you think i’ve missed something (or got it wrong) feel free to leave a comment.

So here comes the shameless plug, if this is something your company has considered implementing and could use some more guidance feel free to reach out with a call or an e-mail. I’ll be happy to act as a resource.

Nathan Therrien
Business Insurance & Benefits Services of MA
978-400-7014 x700 (p)
774-420-2719 (f)
[email protected]

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