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What You May Not Understand About Your Compensation...

08.12.2012
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A small wave of excitement was on twitter last month about employee benefits. Specifically, FullContact announced Paid Paid vacation. Essentially, not only do they provide you with vacation time (ie Paid time off), but they will pay for your vacation in the form a of $7,500 'bonus' in salary (taxable of course).

This is a great marketing strategy, as it drove a lot of social media traffic to their business yesterday. I'm sure they encountered a lot of new applicants, and probably some new sales leads as well. Nicely done.

However, I will take a skeptic's view of this and share how I see this from the business side.

1. At the end of the day, the business looks at the total cost of an employee. This includes salary, taxes, medical coverage, training, paid time off, and miscellaneous benefits as a whole number.

2. Businesses are run on margins — they must take in more revenue than they pay out in expenses.

3. Employees are an expense.

Digression:
Ok, so #2 assumes you are running a profitable business. It seems that FullContact also announced an additional 7M in funding, too, so the whole margin part can be set aside, as they are not profitable, or at least in 'growth mode' where profits are sacrificed for market share. This doesn't mean they can't make it all work, but let's agree that their model is not YET stable.

So, at the end of the day, a company can afford to set aside a certain amount of its income to employee compensation. Some companies set out more money than others. Companies then decide how to allocate this money. For example, a theoretical competitor to FullContact may choose to simply pay every employee a higher salary instead of offering a Paid Paid Vacation benefit.

My point is simply that the allocation of money within the benefits package is essentially a zero-sum game.  A company may choose to offer more vacation, more cash, better health coverage, etc.  But these decisions are mostly done apart from determining how much the company can afford (and chooses) to spend on its employees.

I don't think there is anything wrong with FullContact's announcement, plan or structure. I think they did a great job of garnering a lot of attention for their business (well-timed with a new round of funding). Nice work.

My point is simply that when you evaluate a company or package, realize that everything costs money, and look for a company that has their compensation package well-alligned with what you value.

I believe the most transparent approach to compensation packages is a flexible 'points' model. Essentially, employees get a certain number of points, and can use them to buy the benefits that are important to them. If you want more vacation, use your points on that. If you want more salary, apply your points to your salary, etc. While this is really an ideal plan as it enables the employer to get the most employee value for each dollar it spends, it is more costly to set up and administer, which may be prohibitive for smaller firms.
Published at DZone with permission of Eric Daugherty, author and DZone MVB. (source)

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