While there are currently four generations in the workforce, it’s undeniable that the youngest, Generation Z, is the one in the spotlight. This generation is shaping the ongoing reinvention of work, as their salary and benefits expectations greatly differ from any generation before.
Gen Z – considered widely as those born between 1996 and 2012 – is projected to make up a quarter of the workforce by 2027 and will continue to grow in number for years beyond. While the oldest are postgraduates who are establishing themselves in careers, the youngest are preteens who are years away from their first jobs.
Startups who depend on attracting and keeping top talent to grow are wise to pay attention to Gen Z’s salary, benefits, and overall workplace expectations, because the rules of their predecessors don’t apply. This is a generation of digital natives whose views have been shaped by technology, the pandemic, remote school, inflation, social movements, and political turmoil.
So how do you become an employer of choice for Gen Z? Read on to learn what this generation expects from employers and how to design your startup’s comp and benefits strategy to attract Gen Z while aligning with business goals.
Gen Z Salary Expectations: Start Low and Work Your Way Up? No Thanks, Says Gen Z
While the U.S. Bureau of Labor Statistics says the average U.S. annual salary is currently $65,470, Gen Z doesn’t think that’s enough. A recent study found that Gen Z is the least likely (41%) of the working generations to consider $74,000 a year as middle class.
In fact, Gen Z workers say they need $177,633 to feel financially healthy, compared to $133,758 for millennials, $112,222 for Gen X, and $78,317 for Boomers.
And to feel happy? That starts at $128,084.
Startups are known for their fast-paced and innovative culture, which can be extremely attractive for Gen Z workers as they’re known to be individualistic, entrepreneurial, innovative, and have a strong desire to make a positive impact.
However, Gen Z’s salary standards can be out of reach for many startups considering they typically have less experience than older peers. Startups that want to attract Gen Z employees should be aware of these salary expectations. Currently, 35% of Gen Z workers say compensation is the top reason they’re dissatisfied with their jobs.
No Stigma about Quitting If Expected Gen Z Salary Range Isn’t Provided
For Gen Z, dissatisfaction often leads to moving on to another job. They aren’t ones to tough it out and hope for the best. While job hopping was once considered a bad look, 83% of Gen Z consider themselves job hoppers. The average salary increase when changing jobs is 14.8%, while salary increases for employees who remain at the same company are generally only 5.8%. Because of this, Gen Z finds less value in building tenure at a company.
62% of Gen Z workers are actively or passively seeking new jobs, compared to 49% from other generations. Meanwhile, 70% of those who said they were loyal to their employees were also passively or actively seeking new jobs.
How Much Pay Is Too Much? Develop a Compensation Strategy to Guide You
Often, Gen Z salary expectations, what’s fair for the market, and what your company can afford are at odds. But in the race for top talent of any generation, it can be tempting to go beyond your budget to win over a candidate. While that may feel like victory, overpaying can have major implications on cash flow, especially given that people spend makes up at least 75% of a company’s expenses.
That’s why a well-constructed compensation plan is so important. It acts as a guidepost to keep your hiring decisions in line with company goals and budgets. Keep the following essential steps in mind as you develop your own compensation strategy.
Benchmark Against Competitors
Analyze current salary data to see what other companies are paying for specific roles. When salary benchmarking, use only data from companies in your industry and of similar size and funding stage to get the most accurate perspective of the market. This will help you communicate pay ranges and compare them to Gen Z salary expectations.
Develop a Compensation Philosophy
With your company’s goals and finances in mind, decide how you’ll pay compared to current market trends. For example, will you pay at the top of the market average or below? Formalize your plan in a compensation philosophy, which will define how your company will pay and reward employees. Refer to it all for all comp-related decisions, including cash, equity, bonuses, and commissions, to ensure your company is spending responsibly.
Define Your Job Architecture, Job Roles, and Levels
A key part of a compensation plan is a job architecture framework that defines job roles. Each role has a series of levels with their own criteria for experience and skills, and a pay range based on market data and the company’s compensation philosophy. These elements will help you ensure you’re hiring the right level of talent and the job offers align with your compensation plan. This also ensures you’re presenting equitable pay ranges and can discuss more realistic salary expectations, if needed.
Develop and Actively Track a Headcount Plan
Everything comes together in an annual headcount plan that defines how your company will allocate its budget to hiring the people it needs for growth. Keep a sharp eye on your headcount data to make sure you’re staying in line with the budget and not drifting from your compensation philosophy by granting too many exceptions to the budget. This is especially important for startups who are not yet profitable and depend on investor funding to keep operating.
Gen Z’s Benefits Expectations: Beyond Medical and Dental
When it comes to benefits, Gen Z wants more than the ability to see a doctor or dentist. They have a holistic view of wellness and expect employers to help them take care of their physical, mental, and financial health. They also seek flexibility, fulfilment, and career development.
Here are some benefits expectations to consider as you develop your benefits offerings and wellbeing programs that attract, retain, and support Gen Z workers:
Work-Life Balance and Work Location Flexibility
Work-life balance is a top priority for Gen Z. 54% of soon-to-be college graduates would turn down a job offer if an employer didn’t offer work-life balance.
Central to that balance is flexibility in work location. 77% of Gen Z employees who have hybrid or remote jobs would consider looking for a new job if they were asked to work on-site full time. And 1 in 6 would immediately start looking for a new job.
If you’re thinking about bringing employees back to the office, consider the effects on employees who prefer flexible arrangements and whether it makes sense to continue to offer hybrid or remote options.
Mental Health Support
Support for mental health also tops Gen Z’s list of benefits expectations. 61% would consider leaving the job for another employer with better mental health benefits.
Mental health support is also a key consideration when choosing an employer. While many organizations now offer a variety of mental health tools, less than one-third of Gen Z use them. This indicates employers must go beyond just providing mental health benefits; they must communicate their offerings and deliver tech solutions that make it easy for employees to access and learn about their benefits.
Upskilling and Career Paths
Gen Z expects to climb the career ladder quickly. More than half of Gen Z respondents in Monster’s study said they’d turn down a job offer from a company that doesn’t offer growth opportunities, while 37% said immediate growth and advancement opportunities are the most important aspect of a job.
With this data in mind, review whether you’ve clearly defined and communicated career paths and what training and education opportunities you can offer.
Manage Gen Z Salary and Benefits Expectations with a Total Comp and Benefits Solution
By balancing Gen Z’s salary and benefits expectations with a total comp and benefits plan that protects your startup, you can woo and win Gen Z talent without burning through funding and equity. Doing this effectively requires a team with the experience of helping startups scale by managing their compensation and benefits strategies.
Sequoia One is the only PEO solution designed specifically for VC-backed tech startups. It combines outsourced HR, payroll, and compliance with an experienced advisory and services team. And, Sequoia One provides an end-to-end total compensation and benefits management platform to help startups make a big impact through their investment in people. See why Sequoia One is the most referred PEO in tech with our proven history of coming through for tech startups.
