Offering a new or improved benefits package is a time proven way to attract new employees and retain existing ones.  After all, who wouldn’t want a dental insurance plan that is 75% paid by his or her employer?  Or, perhaps, a 401K plan with a 50% company match, up to 5% of salary?  To the surprise of many startup managers, employees do not always react as expected.  The value of a benefits package, it seems, is in the eye of the beholder.

To be clear, I am a proponent of offering employees insurance (health, dental, life, vision, prescriptions, FSA, HSA), 401K plans, profit sharing and other benefits to the extent that a company can afford to do so.  Most employees will value and take advantage of such offerings.  However, startup managers, especially those offering workers benefits for the first time, should be aware of these possible, even likely, adverse reactions:

Reduced Paycheck Complaint
Many Americans live paycheck-to-paycheck.  For these workers a seemingly small decrease in net pay resulting from, say, dental insurance deductions, will be unwelcome.  I’ve seen many a benefits kick-off meeting go astray when the “impact per paycheck” numbers are discussed.

Covered Under Spouse’s Plan
When benefit plans are first introduced in a startup, it is not unusual for an employee to approach management with the following argument: “I already have health insurance under my wife’s plan, so I will be saving you $XXX per month in company paid health insurance premiums.  I believe I am entitled to share in those savings.”  It’s a specious argument but one that I have heard more than once.

Retirement Is Too Far Away
Managers can be surprised at how few employees take advantage of company sponsored 401K plans.  For younger workers retirement preparations can be a low priority.  Paying off student debt, raising children, purchasing homes, and other more immediate tasks take precedent.  For older workers, well, let’s just say that poor retirement planning is a multigenerational, national problem.  Fifteen percent of Americans have no retirement savings at all; the majority of the population have insufficient retirement savings.

The Unusual
I once had an employee complain that my company’s (first) health insurance plan would force her to change doctors.  I assumed her doctor was not in the BC/BS network.  No, her GP was in the network.  The problem was that my employee had been using another person’s health insurance card and name (fraudulently) with her present doctor.  If she participated in the new company insurance plan, she would have coverage under her actual name; she would have to change doctors.

So, as often is the case with startups, the “textbook” approach only goes so far.  When introducing a new or modified benefits plan, be prepared for the unexpected.  The beauty of benefits is in the eye of the beholder.


Peter Dragone - Co-founder of Keurig.