Tesla leases and wedding expenses: The arms race in employee perks

Nick DeMarco runs a small biotech startup in Raleigh, North Carolina, that makes scientific instruments. But what got his company, Practichem, featured from CNBC's "Power Lunch" to The Huffington Post to Fortune's website last week wasn't the innovative products he's making. It was his promise to lease Tesla Model 3s to employees when they become available.

"The world's changed a lot, and technology people are really hard to bring in," DeMarco, who has 10 full-time employees and is trying to double that number with new hires, said in an interview Monday. He believes spending money to lease the wildly popular cars - which are not expected to be available until at least the end of next year - will turn out to be a smarter recruiting investment than funneling more money to headhunters. Though he sees the leases as rewards for good performance to help retain current workers, he's also hopeful the media coverage and word-of-mouth from employees will help him hire people with the skills he needs in what he calls an "esoteric field." "We're not sexy," he says.

DeMarco's Teslas may be particularly flashy. But companies have been increasingly thinking beyond the usual buffet of benefits as they try to hire and retain workers with in-demand skills amid a tighter labor market. Companies like Fidelity and Pricewaterhouse Coopers have publicized the student loan repayment perks they now offer. Firms such Netflix, IBM and KKR have touted family-friendly benefits such as extended parental leave, free shipping for employees' breast milk or paid travel expenses for new mothers' nannies. Boxed Wholesale, an e-commerce company with 122 employees that sells bulk goods, sent out a news release last week announcing that it will help pay for all employees' weddings after the CEO learned about one of his employee's financial needs.

"It's really changed over the least five years," says Jane Kwon, a consultant with Aon Hewitt. Companies are asking "what makes us as an employer unique? How do we fight for talent to come to my organization versus another? What's going to make us stand out?"

For the majority of workers who don't get benefits such as paid leave, much less payments toward student loans, the perks arms race to wield new and cushy extras may seem dismally out of reach. And those who lived through the late 1990s and early 2000s may wonder if the froth from that period - when stock options were handed out to seemingly anyone - is being relived.

But human resources experts say that among companies trying to hire employees with in-demand skills, standout perks - and the media mileage they often receive - is likely to continue.

"Whether it's unlimited vacation or infertility benefits or weddings, this type of unusual stuff, we're going to see more of it," said Bruce Elliott, manager of compensation and benefits at the Society for Human Resource Management.

He and others cite several reasons. One is that perks like extended parental leave and student loan repayment are clearly aimed at attracting and retaining millennials, who now make up the largest segment of the workforce. Not only do some of these new benefits square with the life issues millennials face - paying the bills after college, starting a family - they appeal to young workers' desire to be affiliated with a place that's seen as innovative or first to offer something. "Millennials all rank that consistently higher," says Dustin Clinard, a managing director for Universum, an "employer branding" research and consulting firm.

Meanwhile, a few companies are in the process of trying to make perks less of a one-size-fits-all package and more of a choose-your-own menu of options, Kwon of Aon Hewitt says. They intend to give employees a set dollar amount they can spend on benefits - letting older employees or parents with children opt for a richer health plan, say, while younger employees might choose loan repayment plans. As a result, Kwon says, the array of creative perks on the menu is likely to grow.

It helps, of course, that employers' perks seem to garner plenty of headlines, not only grabbing the attention of would-be employees, but customers who increasingly want to buy from companies that share their values.

"There is absolute marketing value from differentiating yourself with regards to benefits," SHRM's Elliott says. "It's kind of serving two purposes - highlighting the social consciousness to current and future employees, but also marketing [it] to customers who might think 'oh, that's a nice company, I think I'll buy from them.' "

Boxed Wholesale CEO Chieh Huang says that wasn't part of his calculation when he decided the company would pay for an employee's wedding - and then extend the benefit to other workers, reimbursing them up to $20,000 for wedding expenses. In an interview Monday, he said he settled on it only after hearing that an employee was trying to save enough to afford his wedding in time for his mother, who is gravely ill, to attend. If he instead boosted the worker's pay substantially, it would not only "throw the whole pay scale out of whack," Huang said in an interview, but still not let the worker save enough in time.

It isn't the first time Huang has seen his generosity grab headlines: Last year, he said he would pay the college tuition expenses of early-stage employees' children out of funds he and investors personally contribute. (The wedding perk will be paid by the company.) But other than those eye-popping offers, he says he provides little in the way of typical tech-world fringe benefits like office happy hours or free food, choosing to put money instead into things that he believes underscore the social contract employers have toward their workers. His vice president of communications called the announcement "incredibly emotional and FANTASTIC!!!!," but Huang argues it's unclear whether the attention will ultimately be a net benefit - he says he's gotten negative emails, too, saying his programs are "anti-capitalism." "The most tangible benefit we get is in terms of recruiting and retention," he says.

DeMarco, meanwhile, says publicity was at least part of his thinking. Some employers lease cars to their employees, and they "give bonuses all the time," he said. "We just combined the two in a way that gets us the third objective, which was publicity." He hopes the attention will help him hire employees, but also hopes word-of-mouth comes from employees who talk up the company to their network. "We have these evangelists who will be driving around," he says. "Now there's a reason they're going to be talking about us."

Of course, large companies often can't extend what a 122-person or 10-person company can offer to many more employees. But Elliott believes more creative perks will be announced, even from large employers, as they compete over the most talented employees. (When asked what's next, he throws out the idea - only partly in jest - of companies paying for employees' pets to go on vacation with them. "I could see something like that," he says.)

That's all, of course, until the economy turns down again, and the push for top-notch tech workers and others with in-demand skills eases up. After all, the biggest reason employers are funneling money into distinctive perks rather than boosting base salaries, Elliott says, is that they're simply a lot more flexible to offer.

"If you think about it, it's much easier to cut a benefit than it is to cut a salary," Elliott says. When a downturn does come, "employees view it much more harshly when we cut salary versus cutting a benefit."


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