Offering a competitive employment package that includes generous benefits is a great way to attract talented candidates. It can also help you retain the right people and build a loyal and productive team. Employee turnover is costly on several levels, so you should always do what you can to reduce it.
Yet, a recent study of 5,000 companies launched in 2005 points out a risky downside you might not have considered. New companies saw their survival rate drop about 10% with each benefit added (flextime, bonuses, health insurance, and stock options). New companies with no benefits had a survival rate of 55% vs. only 15% for companies offering all four. Meanwhile businesses that lasted 3 or more years, saw their continuing survival rate grow by about 4% with each benefit added to a high of 72% when all four were added.
The lesson for startups is to be cautious when offering benefits. It seems that resources are better used to build financial viability and market legitimacy. Once your business is established offering benefits can have a significant impact.
(Source: David S. Degeest, Univeristy of Gronigen and Follmer, et.al. University of Iowa, as reported in INC, April 2016)
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