Vexed in the city: Working in Silicon Valley tech is much more lucrative than you think

Add in the benefits, the perks, and the transportation tech workers get for free, and the value of their salaries jumps up to 20 percent.

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ThousandEyes, a network monitoring startup, sees perks as a part of its corporate identity. James Martin/CNET

This story is part of a CNET special report that examines the controversy gripping San Francisco as a massive influx of techies feeds an unprecedented economic boom -- and backlash.

Drive around the wine country located about an hour north of San Francisco and you might spot an eerily familiar bus that, if you look carefully enough, seems like one used by Google to shuttle its employees to and from its offices in Silicon Valley.

That's because it is.

As tech industry cash hoards and company valuations soar, the perks dished out to employees are following close behind -- and they're getting as creative as the code behind the products and services tech companies are peddling. In the past couple of decades, the list of handouts has lengthened from free soda and coffee to free meals to commuter benefits, surprise outings, massages, and more.

Tech perks aren't new. But it turns out they don't just make for a nicer work environment, they're also changing the nature of employee pay. Recruiters say that total compensation for tech employees in Silicon Valley and San Francisco is much higher than widely assumed, primarily due to all the sundry freebies they receive -- everything from catered lunches and Wi-Fi-equipped buses to free laundry.

Because of that, companies in and around the tech industry are taking note. Perks across the country are beginning to expand; even a staid insurance company in the Midwest now offers free coffee and soda. But the benefits of working in Silicon Valley continue to outpace any other industry, with dry cleaning, saunas, and on-demand massages becoming not only routine but expected.

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Vexed in the city: CNET looks at how San Francisco is dealing with its tech boom. James Martin/CNET

And so when companies attempt to lure tech workers away from those perk-filled jobs, potential candidates demand more money to account for what they're leaving behind.

How much are those perks worth? The difference may be as much as 20 percent above and beyond their salary, recruiters say. That means on paper, a software engineer at Facebook, Twitter, or Google who makes about $120,000 a year actually pulls in up to an additional $24,000 -- it just doesn't show up in their paycheck, and the Internal Revenue Service doesn't collect taxes on it either.

"They say 'In my last job, we got free gym memberships,'" said Jill Hernstat, a recruiter at executive search firm Hernstat & Co. "It's gotten so out of hand."

It may be out of hand, but employers seem willing to play the perks game as they vie for talented tech workers.

"There is definitely an arms race," said Mohit Lad, CEO of network technology company ThousandEyes, which has about 50 employees in its downtown San Francisco office. He tries to keep benefits costs at up to 10 percent of a given employee's income.

In June, ThousandEyes brought employees to Lake Tahoe, a popular local vacation spot, for three days. One of those days, the company gave out coupons for fun activities like zip lines, golfing, and boating. "It's beyond just giving free lunches, it's having an identity," Lad said. "We're trying to be original in what we give to employees."

How much these perks cost companies is difficult to ascertain. Many companies say they don't track these expenses per employee. But investors watch closely.

When Google filed paperwork to go public a decade ago, its founders defended the company's then unusual perks of free meals, doctors, and washing machines. "We believe it is easy to be penny wise and pound foolish with respect to benefits that can save employees considerable time and improve their health and productivity," Google's co-founders Larry Page and Sergey Brin wrote. "Expect us to add benefits rather than pare them down over time."

Those in the tech industry say their perks aren't just about getting pampered, though. When a company removes the need for employees to worry about food and laundry, it frees them up to focus on family and work.

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Google's busses have become a divisive symbol of Silicon Valley's perks.
Some companies believe their perks help make employees more efficient. Wi-Fi-equipped buses let employees work while commuting. At Google, employees can rent out some of the shuttles over the weekend at a nominal cost, allowing them to easily organize transportation for weddings or wine weekends.

One study by the University of California, Berkeley, found 10 percent of tech employees surveyed would leave their job if the shuttle service their companies offered were discontinued.

Bringing a barber to the office also removes the need for employees to spend time waiting at a salon. Having a doctor on campus -- or an onsite health clinic like the one Hewlett-Packard added to some of its sites three years ago -- saves employees from cutting their workday short. Others, such as Facebook, Google, and Apple have similar programs.

Not all companies offer extensive perks. Employees at a local research lab for IBM can buy subsidized lunches, but they're not free. Apple, too, offers subsidized lunch, though it does have free coffee, tea and, yes, apples. The Apple gym? Employees pay for that.

Not everyone plays the perks game. Parker Conrad, head of HR software startup Zenefits, said he doesn't offer too many of the Silicon Valley staples to his employees. "We don't want to attract employees who are just in it for the perks," he said.

But companies like these are becoming the exception, not the rule.

Supply and demand

One reason these perks keep expanding is competition for experienced software experts and coding whizzes, the engineers considered the backbone of the industry's current boom. To attract top-tier candidates, companies are finding they have to offer something more than just the typical benefits package of health, dental, and retirement.

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Pool and ping-pong tables that were so common in the first dot-com boom haven't disappeared from tech life. James Martin/CNET

"There are a limited number of people who know how to do this stuff and they're well taken care of because they're in demand," said Jed Cloern, a senior consultant for Sequoia Benefits. The most crazy perk he's heard of? A CEO offering helicopter rides as a signing bonus for new employees.

Many of these perks extend to employees' families as well. Some companies, for example, offer money to help offset costs of an adoption. When employees do adopt or give birth to a new child, Yahoo gives them a gift basket and $500, along with up to eight weeks of paid leave. Google also gives $500 "baby bonding bucks," with up to 22 weeks leave for biological moms (12 weeks for everyone else). Facebook gives a gift of $4,000 and about 16 weeks.

Then there's unlimited vacation, something companies like Netflix and Twitter give employees as well. Evernote, a productivity app maker, goes a step further, offering employees a stipend of $1,000 a year to disconnect from work. FullContact, an address book management service in Colorado, offers $7,500 per year to help finance their vacation away from the grind.

TuneIn, a radio-streaming startup in downtown Palo Alto, organized a scavenger hunt in June for employees around its new offices, which were formerly occupied by Facebook. The company also gives employees free gym memberships and commuter passes to pay for train fare.

It's part of "taking care of employees and them seeing that and feeling that," said Sheldon Lamphier, vice president of human resources at TuneIn. And, he added, "It's the cost of doing business in Silicon Valley."

CNET's Shara Tibken contributed to this report.

Updated11:21 a.m. PT to add executive comment.

About the author

Ian Sherr is an executive editor for the west coast at CNET News. He writes about social networking and manages coverage of video games, Internet giants, cybersecurity, the sharing economy, e-commerce and wearable tech. Previously, he wrote about Apple, the PC industry and video games at The Wall Street Journal. He's also written for Reuters and the Agence France-Presse, among others. He's a native of the San Francisco Bay Area, though he knows what real weather feels like too.

 

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