What Does A Competitive Benefits Strategy Look Like?

Every day, we navigate the dynamic world of early-stage technology, where the pace is relentless, the stakes are high, and at the center of it all is “people.”

I’m Cris Cafiero, and for nearly a decade, I’ve been immersed in this space, collaborating closely with founders, CFOs, and people leaders of early-stage, venture-backed startups.

My journey began in San Francisco, where I was introduced to the highs & lows of startup life at Zenefits (acquired by TriNet). Shortly after, I transitioned to ADP, working with tech startups in SoMa and FiDi for almost five years. For the past four years, I’ve been a Business Consultant for early-stage startups at Sequoia, partnering with tech leaders to develop scalable people management infrastructure and, as a licensed health & life insurance producer, maximizing their people investment through compensation & benefits strategies.

Now based in Los Angeles, I share my life with my wife (also my colleague) and our two dogs. I’m all over the latest NBA drama, a Marvel enthusiast, an avid reader, a video game geek, a computer-building hobbyist, a real estate investor, and a lifelong learner.

I care about helping early-stage vc-backed startups build a thoughtful, people-first culture. I care about these teams, because it’s the people behind the product who bring a founder’s vision to fruition and pave the way for both technological & social progress. Admittedly, I care because if I’m even a small part of what helps them be successful, it’s rewarding to me.

I know how to build a strong compensation & benefits strategy that will get them there. It’s the first piece of a convoluted puzzle that a potential candidate considers before they decide to swipe left or right on your job rec. Getting this right is crucial to getting the right people in the seats to drive potentially world-changing results.

This newsletter started from the idea that there are others in our space that live at the intersection of what I care about and what I know.

For that reason, I’ve compiled a collection of topics that I find super interesting specifically in this realm, focusing on how companies can get this incredibly important aspect of the business right from the onset. I hope you will too.

❤️‍🩹 Benefits Contribution Strategies

The number one question I receive:

“How much should I contribute to my employees’ healthcare plans?”

The answer? Well, it depends!

Before approaching a total rewards offering, you must take an introspective look at what you as a founder or people leader are trying to accomplish with this strategy. I find there are three main buckets most fall into:

1. ⭐️ Best of the best - You want to be known as a generous founder who puts their people first. You don’t cut corners, especially at the expense of your employees & their families. For better or for worse, world-class benefits are engrained in the company’s DNA. If you’re committed to this, just know that it’s much easier to improve benefits over time than it is to diminish them after employees become accustomed to such quality.

2. ⚖️ “What’s the benchmark?” - A classic approach. If it’s good enough for other companies than it’s good enough for you. Healthcare shouldn’t be an issue, and it won’t be, but something’s got to give. You’re leading a growing startup and every dollar counts, so give the people what they need and the option to access what they want, at a significantly subsidized cost. They can live with that!

3. 🚫 The minimum is fine for now - Spoiler alert: it’s not. Approaching your employee’s healthcare & wellbeing as a “necessary evil” sends a message that you weigh cost over care, and this mindset will trickle down into your culture faster than you think. Plan on improving it down the road? That’s great, as long as you can hold onto talent (& morale) until then.

Founders need to approach their offering with a “strategy” in mind. The goal of an early stage startup is to bring on the best possible talent as early on in the company lifecycle to hit the metrics they need to present to investors that will catapult them to their next round of funding or exit. To do that, you have to reduce the barrier to entry for a top-tier candidate to leave a comfortable position at a blue chip tech company and take a seat on a plane that’s being built as it flies.

So what does that look like for most SMBs?

According to Sequoia’s 2024 Benefits Benchmarking Report, which surveyed 1,383 companies with <100 employees in the vc-backed technology space, the average Employer contribution to medical PPO plans is as follows:

And here are the annual costs you should be budgeting for your benefits offering:

Today, we’re focusing primarily on medical benefits. We’ll spend more time on ancillary, voluntary, and wellbeing benefits down the road. To keep it simple, here’s a solid foundation for your first medical offering:

1. Richer buy-up PPO option that employees have the option to pay for. Example:

   • Deductible: $250

   • Coinsurance: 10%

   • OOP: $2,500

2. Standard base PPO plan that is significantly subsidized by the employer. Cap your contribution at this plan to control & forecasts your costs. Example:

   • Deductible: $1,000

   • Coinsurance: 20%

   • OOP: $5,000

3. High Deductible Health Plan with Health Savings Account to drive down costs, increase tax advantage, and encourage smart healthcare utilization. Example:

   • Deductible: $3,500

   • Coinsurance: 30%

   • OOP: $7,000

   • Employer HSA contribution: $75/mo

4. Regional HMO Plan for employees in locations where this is the prevalent carrier (like Kaiser) and includes no out-of-network coverage. Example:

   1. Deductible: $0

   2. Copay: $30

   3. OOP: $3,000

Keep in mind, this is not a one-size-fit all solution and the above are estimates of healthcare plan designs. Evaluate multiple options available to you & your specific company demographic, as they could be very different.

If you’d like me to build you a custom strategy, dive deeper into the thoughts behind this offering, or just analyze what you’re already doing today, please reach out. I love this stuff.

There’s a ton more that goes into an effective benefits strategy than just plan offering and contribution. It also comes down to accessibility, communication, and scalability. More on that topic down the road.

💻️ Webinar: 2024 Benefits Trends for Tech

My wife, Rebekah, is leading an upcoming webinar on Benefits Benchmarking trends as companies head into their end of year renewal cycle! That’s right, we’re both comp & benefits nerds and our kitchen is host to many a water cooler chat.

Sequoia compiled key takeaways from their newly released 2024 Benefits Benchmarking Reports for how tech companies are modifying their benefits programs to compete for top talent.

In these quick 30-minute webinars, the experts will cover:

• What are companies eliminating or adding

• Implications of keeping your benefits program competitive

• Cost containment strategies to stretch your benefits dollar

• Emerging benefits trends that are resonating with employees

Startup Session: Tuesday, August 13 at 10 am PT/1 pm ET
Mid-Size/Enterprise Session: Tuesday, August 13 at 11 am PT/2 pm ET

Register here: 2024 Benefits Trends for Tech Companies: New Benchmark Insights

🤖 2024 Benefits Benchmarking Report for AI

MORE benchmarking data? What more could a comp & benefits enthusiast want?

This report covers 139 AI startups, mostly headquartered in CA and NY.

My key takeaways:

• 50% are expanding access to mental health services over the next 12 months

• 71% cited bandwidth and a lack of engagement as the biggest obstacles to developing a wellbeing program

• 50% offer a retirement match contribution

• 89% offer a parental leave policy beyond statutory requirements

What I think this means:

• Mental health: I predict the trend of support emotional wellbeing to continue, if not become a staple in a standard benefits offering

• Wellbeing: Startups are already spread so thin, it’s difficult to properly communicate the value of these benefits.

• Retirement: Matching are expensive, especially for <Series B companies, but often the difference maker for a candidate offer. Consider some match.

• Leave: Working mothers are disproportionately affected by company leave policies. AI startups are progressive in their leave policies, showcasing their awareness and support for employees having families.

Check out the sneak peek here: 2024 AI Benefits Benchmarking

📆 Event of the Month: People Leader Happy Hour

🎧️ What I’m Listening to:

📖 What I’m Reading:

📺️ What I’m Watching:

👾 What I’m Playing:

🖥️ Investor Confidence Webinar Sneak Peek

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