Working at Tech Firms: Lowered Wages, Improved Perks

Working at Tech Firms: Lowered Wages, Improved Perks

By: Daniel Steingold | June 19, 2016

“There’s a trend over the last decade-and-a-half to two decades in the U.S. where the fraction of pay going into benefits has been rising and wages have been falling,” Glassdoor economist Andrew Chamberlain recently told Quartz in regards to employee earnings in the tech industry.

While pay as a whole has stagnated or even decreased in the last few decades for the average American, it is typically thought that this is the case in almost all industries but tech. Sure, a lot of techies wear jeans and a hoodie, but that’s usually thought to be an choice based on aesthetics and comfortability, as opposed to being a financially-backed decision.

This post will delve into the general new trend posed by tech startups: pay employees less in wages, making up for it by providing often extravagant perks and benefits.

Not Your Grandpa’s Enticements

Tech firms have begun to provide unique, and even outlandish, benefits to their employees— benefits that those of a previous generation would have probably never have imagined.

Boxed, a wholesale e-commerce site, provides up to $20,000 to full-time employees for their weddings. It started with the dilemma of one employee not being able to afford a wedding, and became a staple in the startup’s benefit package.

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Chieh Huang, CEO and cofounder of Box told the publication Inc., “We don’t do free meals, we don’t do $10,000 happy hours, we’re lean all around. We don’t have extravagant salaries, but we focus on a few fringe benefits.”

It turns out that Box is not alone— other big tech firms also express their appreciation in unique ways.

Twitter, for example, provides its employees on-site acupuncture and improv classes. Salesforce provides its employees with six days of paid volunteer time a year, along with $1,000 to be donated to a charity of the employee’s choice.

Spotify covers costs when it comes to egg freezing or fertility assistance, while also providing paid paternity and maternity leave. Airbnb gives its employees a $2,000 stipend for traveling the world.

The list goes on and on.

The point to be made is that the status quo— a salary and stock options— has begun to change.

Employers have begun to invest more in the lifestyle of employees, hoping that this will pay dividends when it comes to productivity in the workplace. Increased expenditures on employee perks does reduce wages, but more than that, many believe it creates a certain expectation on the part of employees.

In an era where job hopping is rampant, it can be argued that these benefits have the motive of creating a sense of loyalty and indebtedness to any given employer. Whatever one’s viewpoint on the perks offered by tech firms, one thing is nearly certain: they’re here to stay.

Proponents of Lifestyle Perks

Although many argue that employers are the ones who created the paradigm of providing lifestyle perks or benefits, the reality is that they’ve caught in popularity in large part due to the demands of employees., a leading site for caregiving services, found in a survey conducted last year that 62 percent of employees would leave a job for better benefits. An overwhelming number of individuals have cut back on or left work entirely due to familial obligations, and 41 percent of working parents admit that the lack of benefits for family assistance has negatively impacted their work performance.

Only 30 percent of workers surveyed were found to be “very satisfied” with the work-life balance benefits provided by work, while 10 percent weren’t are satisfied at all. Figures were shown to be even less favorable for women and parents.

Thus, tech firms have done what they should do: fill a need in the lives of their workers.

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While these perks used to be the staple of firms in Silicon Valley, they have begun to spread in every direction, becoming truly ubiquitous nationwide. Tech hotspots everywhere from Los Angeles to Austin, TX have seen the proliferation of what was once a Northern California staple.

The key psychological benefit behind giving perks is that they are believed to increase loyalty and motivation on the part of employees. This is particularly the case when wages and job title remain stagnant.

For firms, some studies have found that there is a “perfect” set of perks: they focus upon the values of convenience, relevance, and affordability. Perks are believed to be particularly helpful for small-and medium-sized businesses, as they give them the ability to compete aggressively with larger firms.

Actively increasing happiness on the part of your employees is a great way to differentiate yourself from another firm, particularly when bonuses are meager, a phenomenon that is becoming increasingly commonplace.

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One study conducted by Washington State-based Greythorn Consulting found that while 57 percent of tech industry workers received a bonus in the past year, 59 percent of the bonuses received were 10 percent or less of the worker’s salary.

Well-implemented perks can be cheaper for the employer, while still remaining relevant and satisfactory for the employee.

Opponents of Lifestyle Perks

Despite the popularity of providing perks to employees, the practice has a number of critics.

One of the main concerns behind tech firms providing substantial perks is that they create a new set of expectations in the employer-employee relationship.

When providing perks, firms often expect employees to work harder, stay longer at the firm, and actually productively use those benefits that they provide. Employees, on the other hand, expect employers to provide a substantial safety net of sorts, which is an unfair burden for what could simply be considered a nice gesture.

Unlike standard benefits, perks also have carry no direct tax benefits, which makes it so they are ultimately not as cost effective as they could be.

It is believed that by providing employees with direct trust and autonomy— the two most desired workplace privileges— a company can gain the benefits of a more satisfied workforce without spending extra money and resources.

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A mobile-based Craigslist competitor named OfferUp has taken the “no perks” philosophy to the extreme.

Regarding perks, CEO and cofounder Nick Huzar commented, “If we’re finding people where those things matter, they’re probably not a fit.”

The firm completely values staying frugal, independent, and hungry, which they emphasize by having their employees build their own chairs and desks on their first day of work.

It is also often argued that with the evolving gig economy, the lines between being an independent contractor and a standard employee have blurred. This can cause another problem in creating confusion as to what perks can and should be provided to non-standard employees beyond legally-mandated benefits.

Ultimately, opponents worry that the employer-employee relationship increasingly hinges upon what snacks, gym memberships, or vacation benefits a firm provides. They argue that the relationship should entail so much more.

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Future of Perks in the Workplace

As aforementioned, workplace perks are here to stay. Thus, it is an interesting exercise to consider what could pop up in the coming year.

In 2013, Forbes pointed out that nap pods and flex time were either already being implemented or on the horizon. Although mentioned facetiously, another suggestion— free rides on the company space shuttle— could eventually become a possibility. (Company shuttles that transport employees to and from work have already been implemented by some firms.)

While you shouldn’t expect every company to be like Google— offering free meals, haircuts, massages, and laundry service, for starters— it will likely increasingly become expectation that tech firms offer generous, relevant, and inventive perks.

If they don’t, someone else will.

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