Gnip is approaching its one year anniversary, and we're in the process of evaluating potential new benefit options to offer employees. I surveyed a few local startups, as well as some early stage VCs, to get their take on how they handle things. The results surprised me.
The question I asked was whether or not you/your firm offered a tax deferred savings plan to your employees (e.g. SEP-IRA, SIMPLE-IRA, or 401k)?
The healthcare related information I got back from folks was gravy, as I didn't even inquire about it.
Aside from equity, Gnip offers a range of healthcare plans through its HR/payroll aggregator service. It allows us to offer big company health care options, even though we're a small-time player. It isn't cheap for the company, but the benefit to recruits and employees is obvious (and frankly a necessity in today's broken health care system). One of the startups I queried, the CEO of which I highly regard/respect, put it best with this statement. "We weigh in pretty heavy on employee benefits because it glues them to us and makes it easier for people to rationalize to their spouse why they are in a risky job. If momma's unhappy - everyone is unhappy :-)." That personifies my thinking as well.
Anyway, what I found was that half of the companies offered healthcare outright as a benefit, and those who didn't, offered some sort of monthly stipend (e.g. $500) to each employee so they could go get their own private healthcare (or at least cover some of its cost). Firms with ~5 or fewer employees opt for this option, while firms with >5 employees put real meat behind their health care offering (e.g. offer plans).
This is where the surprise came in. I'd say half of the firms offer nothing, and the other half offer non-matching 401ks. It obviously doesn't make sense to match contributions unless your company is profitable, and the firms I queried aren't in the black yet; so, no match. What struck me is that 401ks, matching or not, are not cheap to run on the part of the employer (often >$2k/employee/yr), yet there are cheaper options at nearly an order of magnitude less the employer outlay; IRAs (SEP or SIMPLE). Structuring a SIMPLE-IRA for employees runs approx $300/employee/yr, and gives them the option to put aside $11,500 in pre-tax dollars into the same accounts they'd be investing their 401k dollars in. Of course withdrawal terms vary between IRAs and 401ks, but when faced with no retirement savings benefit offering, or an expensive 401k option, I was expecting more startups to have opted for the cheaper *-IRA offerings. My guess is that most folks have experience with 401ks over corporate sponsored IRAs, and just gravitate that direction because of familiarity.
Gnip's still evaluating things, but I thought I'd share these findings as they might be useful to you.
I'm not a CPA, so any stupid decisions you make based on my statistically insignificant results, are your fault, not mine.