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Benefits at Startups

We want to make it easy to set up benefits for your early stage company. This guide provides some best practices for benefits at startups.

Beth Scheer

Before you start hiring your team it’s important to figure out how you’re going to handle benefits. If you can’t answer questions about benefits during the interview process, your potential hires might go elsewhere. Employees expect the basics, like health care insurance and a vacation policy. And of course, you want your employees to be healthy, both inside and outside, so that they can be good team members and as productive as possible. We want to make it easy to set up benefits for your early stage company. This guide provides some best practices for startups that are a good starting point.

During interviews, candidates may ask about benefits. Anyone involved in the interview process should know the basics about what your company offers. Startups often put together a one sheet overview about their benefits plan in case someone asks. Do not start interviewing until you have your benefits set up. You may find yourself in a very uncomfortable conversation if someone asks about a policy you don’t know about or don’t have.

Frequently Asked Questions

Where do I start?

Decide what type of insurance plan will work best for your company now and as your company grows. Here is a great

cheat sheet⁠

from Gusto (full disclosure: Gusto is a Homebrew portfolio company) that explains what the different types of health plans are (PPOs, HMOs, etc. - see glossary of terms below). One sure way to find out what your employees want is to use a basic survey with questions such as:

Do you prefer certain carriers (Kaiser, Blue Shield, Cigna, Aetna)?

Are you looking for a specific plan such as an HMO or PPO?

SurveyMonkey has a template for this type of

benefits survey.⁠

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What next?

Most small businesses work with a benefits broker who is familiar with carriers for all lines of coverage: health, wellness, dental, life, disability, long-term care and voluntary benefits.

How do I find a benefits broker? You can start by checking out these three:

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Gusto⁠

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Sequoia⁠

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Trinet⁠

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For more options:

Broker Finder⁠

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We are a really small company ... fewer than 4 people. What are the options?

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https://justworks.com/features/benefits⁠

- Payroll, benefits, HR and compliance for small businesses.

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Paychex⁠

- Human resources, benefits and payroll.

⁠

http://fundedbuy.com/⁠

FundedBuy is a marketplace and procurement platform for angel and venture backed companies. They do health and insurance benefits.

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https://www.ehealthinsurance.com/small-business-health-insurance⁠

for plans with Kaiser Permanente, UnitedHealthcare, and Anthem.

We are growing out of our current Benefits, Payroll & HRIS and looking for a more robust solution, now what?”

⁠

ADP⁠

can provide HR management solutions designed specifically for VC-backed organizations looking to extend the runway on their investment and reduce labor burn rates. From a full service HRIS to a Global solution and everything in between, we are here to support efficiency for companies who are growing over the 50 employees mark.

How much should the company cover and what should you pay for?

The short answer is it depends on what type of plan you choose.

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Figure B: Average Annual Worker and Employer Premium Contributions for Single and Family Coverage, by Plan Type, 2021

What is considered a standard benefits package?

Health benefits (including vision and dental), paid vacation, and numerous types of leave are standard with early stage companies.

What is standard for paid leave?

10-15 days of paid leave is average among startups.

What about major holidays?

It’s important to post a public calendar so employees know which days the office is officially closed. Some employees observe different religious holidays and may request specific holidays to take off in place of the company posted holidays. As an option, make it known to all employees that they can choose which holidays to observe even if they are not posted as company holidays.

Because early stage companies are often resourced strapped, you may want to add policies such as:

In the first 6 months of employment, you must limit your vacation days to X number of days (unless previously approved).

The company reserves the right to designate black-out dates where only certain people can take time off to product rollouts/business needs.

I’ve heard some companies give unlimited vacation? How does this work?

Tracking vacation timing is time consuming and expensive. In the past few years, we’ve seen companies shift to a “Discretionary Time Off” or “DTO” policy that empowers employees to take charge of managing their own vacation time. An employee can request time off directly with his/her manager when needed.

What are the pros?

Recruiting - a competitive policy when compared to other less flexible policies.

Financial - companies won’t have to pay out employees for unused vacation time.

Business productivity - history suggests that people take less time off when they are in charge of their own vacation schedules.

What are the cons?

Abuse - the potential for a small number of employees to abuse this policy and take advantage of excessive vacation, inconveniencing other team members.

Burn out - because employees tend to take less vacation with an unlimited vacation policy, they may burn out or experience other challenges from being overworked or unwilling to take a break.

How can we tell if this policy is actually working for us?

Survey your employees around 12 months after the policy has been initiated. Look at the data. Are people actually taking off more days than they were when they had a designated amount? Most companies find that people are taking off the same number of days but see this benefit as a highly valued benefit.

Are there any additional types of leave and are any of them considered standard?

Sick leave: This type of leave is when an employee is too sick to come into the office. Some companies give employees a certain number of days allotted for this type of leave (10 is average) and anything additional is deducted from vacation. However, smaller companies and startups tend not to give a specific number of sick days. They opt to let employees who aren’t feeling well enough to come into work and are concerned they may get others sick to just stay home.

Bereavement: Bereavement leave allows people to take time off when there is a death of a family member or loved one.

Buffer⁠

has a policy they call “compassionate leave” and also includes time off to care for ill or aging family members. Here are a

template⁠

for a very standard bereavement leave and also for Buffer’s

compassionate leave⁠

plan.

Jury duty: Depending on what state you reside, employers are

required to pay⁠

for some of the days missed at work due to jury duty.

Election days: We encourage employers and employees to be civic minded. Depending on location, employer

accommodations⁠

for voting rights will differ. However, we encourage companies to provide employees with time to exercise their voting rights. If you’re worried about office productivity, create a schedule that allows employees to vote at different times.

Parental Leave: We have seen companies give anywhere from 12-16 weeks of paid leave to new parents depending on how long they have been at the company.

Fairygodboss⁠

has crowdsourced information from maternity and paternity plans from companies if you want to benchmark against companies in your industry. Check out

Parentaly⁠

Cocoon⁠

, and

Circle In⁠

which help companies navigate leave benefits.

What is the FMLA Act?

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The FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave

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https://www.dol.gov/agencies/whd/fact-sheets/28-fmla⁠

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How can we support new parents who return to work?

Lactation Rooms - A “mother’s room” is not required by law if you have fewer than 50 employees but it says a lot about your company by creating one if you have a nursing mom returning to work. Having to pump in the bathroom or your car is not easy or convenient. Some tips for setting up a comfortable lactation room can be found

here⁠

and on

Winnie's Blog⁠

, a parenting resource developed by Winnie (a Homebrew portfolio company).

Allow a flexible work schedule. Let new parents manage their own hours and work remotely as needed while transitioning back to work.

Create employee support groups for new parents. Some companies have mentor programs matching new moms or dads with new parents returning to work.

Cover childcare costs while traveling for work. Travel upon return to work is hard emotionally and physically, especially if the mother is breastfeeding. Some companies cover the cost of childcare.

Resources:

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https://www.sequoia.com/resources/insights-reports/2023-benefits-benchmarking-report-sneak-peek/⁠

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Parental leave policy generator:

https://www.cocoon.com/blog/parental-leave-policy-generator-template⁠

Parental leave policy review checklist:

https://www.cocoon.com/blog/parental-leave-company-policy-checklist⁠

Paid leave cost analysis tool:

https://www.cocoon.com/blog/paid-leave-cost-analysis⁠

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Additional Benefits

As companies grow, you may start to see additional benefits. Some are standard and need no explanation. Here are some examples of benefits that may get added to the “standard” set of company benefits and a brief explanation of what they are.

Employee Assistance Program (EAP)

An EAP program is a confidential emotional support program where employees can get legal help, emotional help, or a referral for any type of problem. Most people don’t know this benefit exists and don’t want to use it because they think it will go in their HR file. It is 100% confidential. This is a great resource for work related stress or for anything that is happening outside of work and you aren’t sure who to turn to. EAP provides guidance for professional and personal related problems.

How do you set up an EAP? If you have a benefits plan set up, talk to your provider and see if they have a recommendation or strong partner org. Here are a few EAP programs to check out:

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Workplace Solutions⁠

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Comp Psych⁠

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BSH Online⁠

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Gym Reimbursement

Discounted gym memberships or reimbursement for fitness studios are becoming standard in start up benefits packages. Your local gym or boutique fitness studio may have a discounted membership for local companies. If employees purchase a membership, the company may reimburse a specific amount (the standard is $100.00/month). How does a company set this up? To keep it simple, companies can use a basic

Fitness Reimbursement policy⁠

where employees have to submit an expense report. A gym can also mean yoga, pilates studio, or climbing gym.

401(k)

What is a 401(k)? In simple terms a 401(k) is a retirement savings plan sponsored by an employer. Some have said that a 401(k) is like “free money”. What they are referring to is when a company has an employer matching program where the company matches some portion (up to 100%) of the amount of money that you contribute into your retirement plan. Seed stage companies may not offer this type of benefit but as they grow, they may be able to eventually make this is a priority. The employee can put a certain percentage of her paycheck (there is a maximum) into a 401k account and some companies will match that amount. The money goes into a tax protected account intended for retirement. For more information, check out

401(k) basics⁠

. There are many reasons for a company to set up a 401(k) plan:

Retention - most companies offer a 401(k) benefit and you need to stay competitive.

Tax purposes - If you have fewer than 100 employees, you are entitled to a tax credit.

64% of millennials feel they don’t make enough money to save for retirement.

To find out more about setting up a 401K and its benefits, visit:

Gusto⁠

Additionally, Stripe has a great

guide⁠

for retirement plans for startups.

Free meals and snacks

Start ups are known for great snacks and drinks to keep everyone energized. Some companies take it a step further and provide free meals. This benefit isn’t necessarily meant to keep everyone at work longer, but rather to get people to collaborate during meals and hopefully promote cross department teamwork. Additionally, meals at work save employees time and money.

Tuition Assistance

Ongoing training and growth programs are a benefit that startups can offer to employees who want training outside of work. Companies may reimburse anywhere from $2500-$5000 for coursework done that is role related. Most companies require that the employee has been with the company for 12 months and keeps up a B grade point average.

Commuter Benefits

Company provided benefits which covers tax-free transit, vanpool, or parking benefits.

Pet Insurance

Helps cover the cost of veterinary treatment in the event of an insured animal falling ill or being injured in an accident.

Can you explain what some of these medical/benefits mean? I’m not sure if they apply to me.

Life Insurance

Life insurance is a protection against financial loss that would result from the premature death of an insured individual. If you have dependents (a partner or children), then you should think seriously about life insurance to protect your family.

Disability Insurance

Disability insurance provides for periodic payments of benefits when a disabled insured is unable to work. Example - You are skiing and you break both your legs. You are unable to work for a few months but you are still entitled to a paycheck for a specified amount of time.

Short Term Disability

Short term disability pays you a portion of your income for a short period of time after you run out of sick leave. Depending on your plan, STD generally will pay you for between 9 and 52 weeks.

Long Term Disability

Long-Term Disability (LTD) pays you a portion of your income after you run out of both sick leave and short term disability.

Health Savings Accounts

A Health Savings Account (HSA) is an account created for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses

Insurance Deductible

A deductible is the amount you pay for covered health care services before your insurance plan starts to pay. With a $2,000 deductible, for example, you pay the first $2,000 of covered services yourself. After you pay your deductible, you usually pay only a

copayment⁠

coinsurance⁠

for covered services. Your insurance company pays the rest.

Flexible Spending Account

A Flexible Spending Account (FSA) is a benefit some companies give where you can put money aside on a pre-tax basis to help cover the cost of certain healthcare expenses (allergy medication, alternative healers, birth control, chiropractic care, etc). Here is a full list of

eligible items.⁠

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Exempt and Non-Exempt Employees

Exempt - An exempt employee is a salaried employee who is not eligible for overtime.

Non-exempt - A non-exempt employee is an hourly employee who is entitled to overtime.

PPOs

A PPO is a Preferred Provider Organization. This type of health insurance arrangement allows plan participants relative freedom to choose the doctors and hospitals they want to visit.

COBRA

COBRA refers to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, which provides continuation of medical, dental, and vision coverage, and a health care flexible spending account (FSA) option for eligible employees in certain circumstances. See:

What to do when you lose your job⁠

Employee benefits are not just about providing medical care for employees. Today’s benefit programs are holistic programs including overall financial and employee wellness programs. If a high growth company wants to retain its employees, it needs to listen to its employees and make sure it continues to provide the appropriate benefits for the employees. These benefits will change as the company grows. Don’t stop asking what benefits can be provided to keep employees happy, healthy and engaged.

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