Let’s Break It Down
So, you’ve seen the starting point for each offer. Now you need to weigh up which is best, which job suits you most, and which compensation package is the most rewarding. Do remember, though, that these offers are just the starting point. There’s always room for negotiation – and we’ll look at how best to do that a little later.
The salary. Vitally important. The be-all and end-all? Nope. Firstly, don’t just assume the offer with the biggest numbers is the best. Your yearly salary should be at the fair market rate for your industry and the locale. The cost of living in your area plays a major role in establishing the minimum salary you can comfortably accept. Use Paysa’s cost of living tool to get a clear picture. For most people, their base salary is the most important factor when making a purely objective decision, so put this one high on your list of priorities.
Bonuses are nice. They make us feel good. Generally, with job offers in tech, there’s a one-time signing bonus and a yearly bonus. These elements, while nice, shouldn’t be high on your list of priorities as they are either one-time deals or unreliable.
The one-time signing bonus is a nice touch. But don’t be swayed by a big number here. Remember, it’s a one-time thing, so even if you’re super-disciplined and you put the whole bonus away in your rainy day fund, it doesn’t help you professionally long-term. And, a big signing bonus can be a red herring meant to distract you from less agreeable compensation package terms. So be wary of big shiny one-time bonuses.
Yearly bonus offers vary hugely between companies. Many are based on a combination of your performance and the company’s growth or performance during the financial year. A solid yearly bonus plan with a company that’s predicted to continue to grow for the foreseeable future bumps up your paycheck, so this is definitely an important factor. Having said that, remember that you should never rely on a yearly (or any other kind of) bonus to make ends meet. While it is a fantastic perk, if the company fails to grow as predicted or experiences related issues, in any given year, your bonus may be smaller than you anticipated.
Equity is potentially valuable – but you’ve got to know what you’re looking at. There are often terms and conditions that potential employees overlook. Are you being offered stock options? That’s the right to buy stock at a fixed price for a defined period. Are you being offered restricted stock? That’s the right to purchase common stock with restrictions like vesting schedules or company buy-back schemes. Is there a vesting period? That’s the time before shares are legally owned by the employee. How about cliff vesting? That’s when stocks vest at a specific time rather than gradually. So your equity compensation offer may state that your stocks won’t vest until you’ve been with the company for one year. You can learn more about employee equity here.
How important equity is depends on your priorities and the companies your offers are from. A slightly reduced salary at a hot new startup set to explode in the next 12 months could be an awesome move, as your stocks could eventually be worth mega-bucks. On the flip side, the hype may be short-lived and your stocks worth nothing. Stocks at a tech giant like Facebook or Google, however, are likely to remain high-value and carry decidedly less risk. And the level of equity varies greatly depending on your role and seniority. David E. Weekly, a senior product manager at Google, describes equity at a tech giant like Facebook for a level 3 employee (has a few years of experience) would, upon sale at full retail value after vestment, substantially beef up their annual bonus. For a mid-career or L4 employee, that equity compensation would likely double your annual bonus and at L5 (senior level) equity comp should be approaching equal to your base salary. An L6 employee could expect equity compensation significantly above your base salary, and if you’re L8 (director or higher), your base salary compensation would be a mere drop in the ocean compared to your equity compensation.