Quick Cheat Sheet on SaaS Company Employee Benefits

Company Employee Benefits  

Does your company provide free food for all employees every day or just on Wednesdays? Concierge services?  FastPass payments?  Free beer and wine?  Doggie day care?  Massage, acupuncture – the list goes on.  Tech companies large and small provide some of the most extensive company employee benefits for their employees in the competition for the skilled workers that drive growth at tech companies (and for which competition is the highest). More here.  At the same time, some of the fastest growth companies don’t spend at the top end of the benefits spectrum but retain a highly competitive workforce.  At OPEXEngine, we benchmark benefits expense and total compensation expense to peer groups by key performance metrics like revenue growth and employee productivity.

One of the issues in comparing what other companies spend on benefits is to understand what is considered an employee benefit.  The Bureau of Labor Statistics, which collects total compensation data regularly from private and public US companies, published the following break-down for the “Information” sector in June 2016.  Almost 35% of total compensation went to benefits (defined as traditional benefits like vacation, insurance, retirement and legally required benefits like Social Security, etc.).  Here’s the break-down:

Copy_of_OPEX_-_Employer_costs_in_percent

Source:  U.S. Bureau of Labor Statistics, 2016

What’s Your Total Benefits Picture?

Traditional benefits, like those above, are usually accounted for as part of fully loaded compensation.  These benefits are typically allocated to each employee and accounted against the operational department where the employee sits.  Many of the benefits common to tech companies end up in other expense buckets, so it can be hard to get a full picture.  This is particularly true for smaller companies, but sometimes allocation policies don’t get changed with rapid growth and competing priorities. 

Usually allocated with employee compensation by operating department:

  • Vacation/Sick/Personal Holidays
  • Health insurance
  • Life and other kinds of insurance
  • 401Ks and any other kind of pension
  • Short and long-term disability

Often not allocated against departmental expense, but to an overhead expense in G&A:

  • Stock compensation (we used to see this almost always as part of total compensation, but more recently, we are finding stock comp in a general G&A bucket)
  • Employee lunches
  • Recreation services
  • In-house services like child care, massage or other healthcare treatments like acupuncture
  • Outside services like gym memberships, doggy day care, and concierge services
  • Transportation allowances and bulk transportation services for employees

Overhead Versus Departmental Operating Expense

In order to get a better idea of your overall company employee benefits expense, it is worthwhile to round up as many of these miscellaneous expenses that you can find sitting in G&A and at least do the offline analysis of dividing the total by your total employee number.  Ideally, you would automate this process in your financial systems.

Analyzing Compensation and Company Employee Benefits Benefits Against Company Performance

At the end of the day, what you really want to know is whether the amount that you are spending to motivate and retain top employees is comparable to what other companies are spending for top performance.  

OPEXEngine has been tracking compensation and benefits expense for SaaS companies for 10 years.  We look at the benchmarks by revenue size, business model, and growth as well as a number of other dimensions.

If you’d like to compare what peer companies are spending on benefits and what kind of corporate performance they are getting, contact us to learn more.  We are a member-based benchmarking community for SaaS companies; we provide an overall financial and operating metrics benchmarking for each member, as well as the new Compensation Expense Benchmarking Report.  We’d be happy to answer any questions you have on SaaS benchmarks and SaaS Compensation Expense comparisons.

 

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