Competition, Growth Means Huge Costs For Arizona Tech Companies

July 29, 2014

At Axosoft in Scottsdale, employees don't need to bring their own lunch or even leave the office to get exercise.

The software company provides employees with free food and beverages all day, every day and offers up to 10 personal training classes a week at the in-house gym. Axosoft also pays moving expenses and even helps with a down payment on a house for employees being recruited from out of state.

Axosoft also covers 95 percent of its employees’ health care premiums. Hamid Shojaee, the CEO of Axosoft, said it’s always been that way, even despite the fact that his company's health care premiums have almost quadrupled within the past decade.

“We’re improving our long term survivability essentially because it is a very competitive environment, the tech sector as a whole, and if you don't have really smart people working for you, then it's going to continue to be hard to be innovative,” Shojaee said.

Axosoft is actually one of many tech companies in the Valley that offer these kind of perks and impressive benefit packages. The cost can be enormous, but they do it largely because they have to — the number of qualified workers is limited and the competition for them is fierce.

So while the rising cost of health care has many corporations gutting insurance plans and shifting more costs to their employees, tech companies just can’t afford that.

"It’s one of the biggest concerns that member companies have is the rising cost of health care and the uncertainty that the [Affordable Care Act] has brought into the equation,” said Steven Zylstra, president and CEO of the Arizona Technology Council.

Zylstra's organization did a survey recently that found 37 percent of tech companies in Arizona pay all of their employees’ health care premiums. That’s compared to 19 percent of Arizona businesses overall.

In addition to good benefits and perks, tech companies pay their employees really well. Techies generally make 70 percent more a year than the average wage in the Valley, according to May 2013 data from the U.S. Bureau of Labor Statistics. In sectors such as computer programming and software engineering where the labor pool is especially small, Zylstra said wages are skyrocketing.

"What’s been happening is people are poaching," he said. "So they’re stealing from other companies and then that drives up the price.”

Zylstra said there’s no quick fix. The tech worker shortage is a nationwide problem, and many think the solution lies in the education system.

But that’s a whole other topic.