Customized Compensation Arrives

"When George Melvin clinched a job as lead software engineer at Unlearn.ai this past summer, the company made him two offers.

In the first, the base salary made up 70% of total compensation, with the rest in equity. The other was 58% salary, 42% equity. Confused, he asked the San Francisco startup's human-resources department if the twin offers were a negotiating tactic.

They weren't. Unlearn, which uses artificial intelligence to speed clinical trials, recently began offering new hires multiple pay options. It is among a growing number of companies that let new hires customize their compensation with different combinations of salary, equity and, in some cases, benefits.

Mr. Melvin, who is saving for a June wedding, negotiated a third option -- 64% cash and 36% equity.

Netflix Inc. has long let employees choose how much of their pay they want in salary versus stock options. Many employers now adopting personalized comp packages are smaller firms competing for talent against bigger companies, particularly after a 32% drop in the technology-heavy Nasdaq index this year and a retrenchment in tech spending and startup investment.

The customized approach reflects a wider push among businesses to give staff a say in their work situations, from experimenting with shorter workweeks to trading vacation time for money. Like Unlearn, many of those letting recruits pick their pay also give employees the option to work remotely.

This fall, SAC Health System, a community healthcare group with 11 sites in Southern California, began letting its nearly 570 employees cash out unused paid time off to put toward a number of options, including student-loan repayments, retirement savings, health savings accounts and even travel. A service provider called PTO Exchange handles the administrative and tax-compliance issues of paying out unused vacation time for the employer.

In December, Carta, a management platform forstartups, their employees and investors to track and manage equities, began offering corporate clients a template from which prospective hires can select three compensation options. It includes an interactive sliding scale that lets recruits calculate how total compensation could fare if they opt for, say, more equity versus salary.

Carta says it got the idea from client Civic Eagle, a primarily remote-work company that has been giving new hires a choice of varying stock-equity combinations since 2019. Recruits sometimes worried that being given options might be a trick to shortchange them, says Damola Ogundipe, chief executive of Civic Eagle, which uses AI to discover, track and analyze public policy.

"People didn't understand we were giving them a choice," said Mr. Ogundipe.

This year's drop in tech-stocks has prompted hires to rethink their preferences for pay, he says. "A year ago you'd see employees coming in, especially those from the coasts, wanting more equity," he says. "Now they want more financial security and are choosing cash."

Kyle Holm, who leads the compensation practice at Sequoia, a human-resources platform for employers, says there are caveats. Workers who choose different equity options may end up earning different amounts of money for roughly the same job. The varying compensation mixes make monitoring and benchmarking employee pay all the more important, he says." [1]

1. Customized Compensation Arrives
Weiss, Tara.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 03 Jan 2023: A.12.