Free Food Isn’t Cutting It: How Startups Are Competing For Talent In A Tight Labor Market

Life/work balance-Play and graph on computer

Soon after the COVID-19 pandemic started, social media management software startup Buffer made a radical change: It switched to a four-day workweek.

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The decision came as a result of the pandemic and feedback from team engagement surveys. The pandemic and the lockdowns that came with it weighed on employees, especially the parents who now make up around 30 percent of the company.

So Buffer shifted to a four-day workweek, partially to help the parents on the team, but really to mitigate burnout across the company. One of the company’s newer benefits, the shortened workweek is now one of the perks that helps Buffer stand out in a competitive hiring market.

“It comes up a lot in hiring, and we’ve had a couple of senior people we’ve hired recently,” Hailley Griffis, Buffer’s head of public relations, said in an interview. “And it’s a really competitive talent market right now so the four-day workweek is a differentiator.”

Startups are hiring for workers in a brutally competitive talent market. The U.S. unemployment rate fell to 3.6 percent in March, a new two-year low, according to the most recent report by the Bureau of Labor Statistics. Startups flush with cash after a record year in venture investment made lofty hiring goals, but face stiffer competition amid the “Great Resignation.” 

That means the stereotypical startup perks—pingpong tables, daily catered lunches in the office—aren’t cutting it anymore for companies that want to attract the best workers.

Tech’s reputation for cushy benefits and higher pay have helped the industry stand out among other sectors. But tech companies still need to step up their game to compete for talent in 2022’s tight labor market, and many are responding by offering higher salaries, flexible schedules, more paid time off and, increasingly, employer subsidies for things like fertility services, gym memberships, and child and elder care.

“If you’re not offering work from anywhere, if you’re not offering unlimited PTO, if you’re not celebrating that PTO and making sure people are actually using it … you’re falling behind,” said Jordan Peace, CEO of lifestyle benefits marketplace Fringe. “They went from nice-to-have to must-have to table stakes really fast.”

Tech salaries climb rapidly

“Widespread hunger for talent” boosted the average U.S. technologist’s salary 6.9 percent between 2020 and 2021, to $104,566, according to tech career website Dice’s 2022 tech salary report. 

That figure represents the highest salary ever recorded by the report, and “a positive sign for technologists in terms of the current and potentially future value of their skills and experience.”

IT Management CEO, CIO, CTO or similar positions had the highest average salary in 2021, at nearly $152,000. Systems architects and cloud architects/engineers came in second and third in terms of salary, earning an average of around $148,000 and $141,000, respectively. 

Web developers saw the highest average salary jump between 2020 to 2021, with those in the profession earning nearly $99,000 per year, a 21 percent increase from the average salary in 2020.

Salaries are on the rise around the country, not just in tech hubs like San Francisco and New York. Pittsburgh and Atlanta posted some of the fastest-growing salary increases, with pay rising around 14 percent year over year, per Dice. Pittsburgh’s average tech salary was around $98,000 in 2021 and Atlanta’s was around $108,000, while Silicon Valley’s was about $133,000.

Perks, not just pay

Tech employees don’t just want more money. They also want benefits that encourage work-life balance.

About 27 percent of tech workers cited child and elder care as an important benefit, but only 10 percent said they receive the benefit, according to Dice. That demand is partially because more employees have reached the age where they’re caring for both their parents and their own children. 

Remote work has also become a priority for talent, and the job market reflects that: The percentage of paid job postings on LinkedIn offering remote work jumped 357 percent between 2020 and 2021, with media and tech having the highest concentration of remote job postings on the platform, per the company.

The “most important perk” really varies from employee to employee, and even changes for an employee over the course of their employment, according to Peace. A monthly fitness stipend, for example, could be an important benefit for an employee who enjoys working out, but may not be as useful for an employee who’s recovering from surgery.

Fringe’s marketplace allows employers to allot points to employees to use for whatever benefit they want. For example, an employee could use their employer-granted points for a fitness membership or for an Airbnb credit.

The top category employees on the Fringe platform consistently choose to use their points on is food: DoorDash orders, meal kits from Blue Apron, grocery delivery, coffee subscriptions and the like. That makes sense given that everyone needs food, but beyond that, the perks that employees choose varies. 

For example, in March 2022, the top vendors employees on the platform chose were DoorDash and UberEats, followed by Airbnb and Uber. Neither Airbnb nor Uber was in the top 10 places employees chose to spend their points in April 2020, given the pandemic.

Peace said offering workers those choices is important. “When you don’t restrict people, you don’t say you must care about wellness, you must use this money for your student loan payment,” he said.

‘Supporting the whole person’

Sales platform Seismic undertook a “pretty significant overhaul” of its benefits going into 2022, according to Linda Ho, the company’s chief people officer.

The San Diego-based company has employees in seven countries, so it’s playing “catch-up” when it comes to providing benefits that other countries require.

The company’s decision to provide egg freezing and IVF benefits through its insurance provider proved to be one of the buzziest changes.

Seismic evaluates its benefits approximately six to nine months before the end of the calendar year and surveys its employee demographics and what they might want, Ho said. Employees were especially interested in the decision to offer fertility benefits, a rare offering for a company of Seismic’s size of about 1,500 workers.

Seismic looked at its competitors while considering what perks to offer to attract talent, Ho said. But she emphasized employees want to be supported in more than one way.

“One singular benefit will never attract and retain employees,” Ho said.

Seismic wants to “ignite growth,” both professionally and personally, she said. That means supporting employees in a holistic way—such as if they want to start a family now or potentially later.

“There’s an expectation now, rightly so, that employers should be managing and supporting the whole person,” Ho said. “Those employers that don’t step in will be the employers that the big resignation will be affecting.”

Illustration: Dom Guzman

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