You’re shut out of tribal knowledge on tech compensation if you’re not in the correct social circles, which is a significant disadvantage.
You can easily earn $50,000 or more by simply asking the right questions. Learn to communicate in the language of technology compensation.
As a sobering reminder, the IT industry is awash in cash. Starting salaries for new graduates at significant technology businesses sometimes exceed $150,000. With enough effort, you can consistently earn $500k in total compensation, even if you’re a frontline employee.
Make sure you understand pay since millions of dollars are exchanged in wage negotiations every day.
1. Recognize the Value of Technical Compensation
Your complete pay package includes much more than just your income. At the very least, your “total comp” entails:
Monthly salary: the amount of money you get paid each month.
Equity: A share in the company’s ownership, which might easily be half or more of your overall compensation.
Benefits: Health insurance alone might cost your company $500-1000 per month in the United States. Vacation days, free meals, and other amenities are included in benefits packages. Because these advantages are (predominantly) tax-free, you’d prefer to have them over cash.
Yearly Bonus: A performance-based percentage incentive on top of your pay, only seen in public companies. The recruiter will most likely give you a “target bonus” (e.g., 15%) if you reach the company’s objectives. In addition, it sometimes includes extra equity (a “refresher”).
Sign-up Bonus: A one-time bonus is provided when you join up or work the first day. If you depart after X months, you may be required to repay the money. It’s very typical in significant-tech businesses, and it may cost anywhere between $10k and $100k.
Other Benefits: A slew of one-time or continuing monetary advantages, such as a relocation package, phone stipend, commuting benefits, vehicle allowance, and so on.
Level, which expresses your seniority, is the essential input regulating comp. For example, at Facebook, level E3 represents a recent graduate, level E4 represents someone with a few years of experience, and so on, all the way up to E9 (after the first few levels, the experience becomes less important).
The more expensive or higher level you are, the more complicated your compensation mix grows and the more skewed toward equity it becomes.
Understanding which lever to pull is a massive part of pay negotiation: knowing how to use the complexity to your advantage. Part of the intricacy is to make both parties feel like they received a good bargain. Nobody is satisfied if there is just one number to debate over.
Companies have different levels (for example, an “L5” engineer at Amazon is not the same as an “E5” engineer at Facebook).
Recognizing and Valuing Equity
Women earn half of what males do in equity – equity is complicated and prone to poor results.
The term “equity” pertains to a company’s ownership share. Only one of two things happens: the firm is acquired or listed on the stock market, and your ownership in the company turns to cash (an IPO).
An equity award usually lasts four years, and you’ll get X number of shares throughout that time, which you’ll gradually acquire (or vest) over time. However, in most cases, vesting will be subject to a one-year “cliff”: you will not earn anything for the first year, and on your first anniversary, you will vest 14 percent of your shares. This formula (“4-year vest, one year cliff”) is practically standard in IT.
Because you’d need to pay taxes on it straight immediately, the corporation will never offer you shares directly. So instead, businesses have devised complex systems to avoid paying taxes. RSUs and stock options are the two most frequent.
If you want to understand more about equity, the Holloway guidebook is the most excellent comprehensive introduction.
If you were offered Restricted Stock Units (RSUs), which are frequent in more prominent corporations, you should take them.
An RSU is a guarantee from a company to grant you shares when they go public or sell (they won’t give it to you right now since you’d have to pay taxes now). It is an excellent option for you since it entails the least amount of danger and complication. However, it is a future promise, and as such, it generally comes with many conditions. There are often restrictions on when, how, and to whom you can trade your stock.
If you were given stock options (ISOs/NSOs), which are pretty prevalent in startups,
A stock option is a contract that permits you to buy shares at a lower price than the market price, known as the “strike price.”
When you join, the strike price is set, and all you have to do when you leave is determine whether or not you want to acquire shares.
For example, you could be able to purchase shares for $1. If the company’s shares are now valued at $1.50, your equity is worth $0.50, depending on the number of options you hold. Of course, you’re hoping that by the time you depart, the shares will be valued at more than $10: the more extensive the disparity, the better.
To be clear, you must invest money to get shares. When you depart, it might easily cost you tens of thousands of dollars – even if you’re getting a terrific bargain on the stock, this may or may not be money you have on hand.
Stock options are more unpredictable than RSUs, but they are preferred because they provide significant tax benefits if you play your cards well. If you get any significant portion of your remuneration in the form of stock options, you should consult with a tech-focused CPA.
When a corporation offers you stock, they’ll tell you how much it’ll cost you: X,000 shares over four years, “worth $X00,000.”
The valuation is based on the latest funding round’s price paid by investors. For example, if the most recent investors bought $1 million for 1% of the corporation, the corporate entity is valued at $100 million, and a 0.1% investment is “worth” $100,000.
All IT businesses, big and small, provide stock to some workers, but not all – support, marketing, operations, and other departments, particularly newly-hired staff, may not always get ownership.
That figure can range from “as good as cash” to “pie-in-the-sky voodoo,” depending on the business level.
For a publicly traded corporation on the stock exchange (Facebook, Amazon, etc.)
You’ll be able to sell your shares on the stock exchange directly. Of course, there are certain limitations (for example, lockout periods, where you can only trade during particular weeks of the quarter), but the shares are essentially cash.
The value of the shares, on the other hand, will fluctuate significantly over your stay. It’s like if a large portion of your payment is required to be put in a single company – it’s likely not what you’d do if you had the option, and that lack of diversity is valuable.
For a pre-IPO enterprise that is expanding and doing well (ex. Airbnb, Stripe, etc.)
You might reasonably anticipate your stock to be worth something, at some time, in a successful, high-growth firm with renowned investors.
Whatever the case may be, you won’t see any money for years. So, based on how much you trust the company, how far ahead they are, and your risk tolerance, consider the stock worth 60-90 % of the advertised value. Also, bear in mind that although your odds are strong, no promises can be made.
For a mature enterprise on the verge of going to IPO (Doordash, Airbnb, etc.)
One of the only ways a mere person may gain equity is to work. It would be best if you generally preferred equity over cash. Consider pricing the stock at 100-130 % and pushing for more significant equity over the compensation if you trust the company’s possibilities and don’t need quick cash.
For a new company
Assume you’ll struggle to choose the right business – you’ll be worse than professional investors in almost every way: they have more expertise, more knowledge, and the opportunity to diversify. But unfortunately, even experts have a terrible track record: half to eighty percent of early venture capital investments will never profit.
If you’re comfortable with it, think about it. You should handle your equity as if it were a winning lottery ticket. Ignore any dollar figures given to you by the recruiter and prepare to live entirely on the basic pay.
Suppose you join an early-stage business where a large portion of your remuneration is in the form of stock. You will have access to the company’s inner workings. In that case, you must determine if the company will succeed and be ready to depart as soon as possible if you don’t believe you can change the trajectory.
You’re now an investor, so congrats! You’re investing big bucks in companies about which you know tiny – making the appropriate selection is the single most significant factor in determining your lifetime profits and personal development.
2. Determine Your Value
The amount of money you are paid has nothing to do with your costs; therefore, you shouldn’t accept a lower salary because you can afford it.
Similarly, negotiating points surrounding your living expenses (mortgage, school loans, etc.) will be unappealing to recruiters. Your abilities have a market value; what you do with that money has no relevance in the remuneration argument.
Please, please, don’t depend on Glassdoor.
Glassdoor, Payscale, Comparably — they’re all grossly wrong for tech. These sites are often out-of-date and severely abuse equity (a significant component of tech salary). It frequently prompts individuals to accept less than they deserve.
- H-1B visa filings are legitimate, but they only provide a basic income.
- AngelList is an excellent resource for entrepreneurs looking for initial funding and growth equity.
- For technical jobs at startups, Triplebyte provides high-quality information (base only)
- Blind is excellent for giant tech companies.
Unfortunately, the most up-to-date information is a changing goal even among HR specialists. The best method for you to access it is via third-party recruiters – they’ll eagerly accept your call.
Startups and pre-IPO companies often have lower compensation (primarily due to equity). Outside of large tech hubs, particularly significantly outside the US, it’s lower for non-technical occupations (e.g., EU).
The fact about wages is that your employer has a lot more information than you do when it comes to determining how much you’re worth.
3. Pose the Appropriate Questions
First, hold off on the wage discussion until both of you are sure that this is the perfect position for you both. Do not reveal your prior salary. To inquire about your income is unlawful in California and several other US states.
If they inquire about your income expectations or compensation needs (and they typically do in the early stages of the interview process), politely but firmly answer that you’re not comfortable disclosing at this moment.
How much do you want to get paid?
I believe it’s a little early in the discussion to talk about it; I need to understand more about the team first, and I’d love to talk about it later.
So, Jessica, I’d want to be sure I’m not wasting your time. Can you offer me a rough figure?
If there’s a mutual match, I’m confident we’ll be able to reach an agreement, but it’s much too early to say.
Every employer will inquire about projected pay, and any seasoned professional knows not to respond. Nevertheless, it is a regular aspect of the recruiting process; don’t be scared to assert yourself.
The recruiter will contact you later to know whether they would like to make an offer and set up a call. It is the money talk, even if it isn’t said explicitly. It will be a fact-finding discussion.
Hello, Jessica! The team was ecstatic to meet you, and I’d like to share the following information about your offer: $125,000 basic salary, $300,000 in RSUs (over four years), and a $20,000 sign-on bonus.
I’m enthusiastic about the team! Thank you for being considerate. Can we talk in a few days? In the meantime, I’d like to ask you a few questions.
Sure! Allow yourself to do so.
That’s the end of it. Reveal your enthusiasm for the new position, but resist the desire to respond to the figures, discuss your previous salary, debate, or make a case. Don’t be startled if the wage offer is more significant than anticipated.
Your objective is to gather data and then withdraw to a location where you can review all of the specifics with a level mind. Then, ask yourself the following questions as a follow-up:
What is the pay scale for the job offer? What are the differences between the criteria for this level and those above it?
What is the pay range for this job? If requested, an employer in California is legally required to share this information. It is, without a doubt, a very legitimate request.
How much is the equity now worth? You might also inquire about the stock stake in the organization. What is the company’s worth?
What is the timeline for vesting? Is there a cliff after one year? Are there any vesting deadlines I should know? Verify if the equity was offered to you on an annual or four-year basis.
What is the strike price of options (the amount you’ll spend for the stock)? How long do I need to exercise my options once I leave?
It’s completely normal to ask for some time in a transaction involving hundreds of thousands of dollars.
If you’re informed the offer has a strict deadline (what’s known as an “exploding offer”)
A tight deadline is sometimes necessary, but it’s more frequently a trick to keep you from wandering about aimlessly. “Exploding offers” are a poor industrial practice that is regrettably all too typical with new grad offers, as employers attempt to lock down prospects before the competition.
Here’s a little-known fact: if you refuse to accept a job offer that has been signed, nothing terrible will happen to you. You may be advised that it can damage your reputation, but you will be alright, mainly if you work for a huge corporation.
Because you’ll be devoting years of your productive life to a company, it’s only natural to want to make the most excellent selection possible. So don’t sign a contract you don’t plan to keep, but don’t feel awful if you have to pull out, mainly if it involves unethical action.
Doing nothing is the dumbest mistake you can make in salary negotiations. But, of course, everyone regrets it: the opposing side wants you to negotiate, and accomplished professionals like you are used to doing so.
4. The Salary Negotiation
Keep in mind that the corporation just paid tens of thousands of dollars to discover you, vet you, and so forth. Instead, they’ve wasted time sifting through a slew of ineligible applicants. The recruiting manager has been looking for someone to fill the position for months and has now found you. The recruiter must fill quotas. It is a process that everyone wants to go through.
Ascertain the Correct Level
The level is the most critical determinant of remuneration. The compensation ranges for each level overlap: if level 4 is $125k-$155k, level 5 may be $145k-$160k. For base and equity, there are two distinct bands.
You should aim for a level at which you’re sure you’ll get promoted within a year, and you should aim for the top of the band. Of course, it’s preferable to be at the top of a lower-level band. On the other hand, a higher level does not only imply a more considerable compensation; it also means more work responsibilities.
However, if you’re chatting with a massive tech corporation (Facebook, Google), moving your level will be challenging, particularly for technical hiring. Based on your “packet,” a hiring committee will usually determine your level.
The committees are conservative, preferring to join at a lower level and work your way up.
Leveling is primarily based on your job experience and past level/seniority in smaller organizations and notably non-technical positions.
Master the technique of paying attention and repeating if you want to improve your level. When you inquire about a level shift, explicitly tie it to the recruiter’s criteria, just as you did when you asked about the credentials necessary for the level.
The system design interview is especially crucial for technical professions regarding leveling.
What separates an L7 from an L6? Would you want to learn more about levels?
L7s are often those who have managed large-scale initiatives with many cross-functional collaborators and executive visibility.
Good day, Mark — Is it possible to reevaluate the offer level? I’m in charge of a sizeable company-wide infrastructure revamp in my present position, and I regularly keep in touch with the CTO. L7 seems to be a better match and would help me achieve my goals.
Could you elaborate on your responsibilities? On Monday, I’ll be able to talk with the recruiting manager.
Negotiate for the Top End of the Price Range
After you’ve determined that the level is correct, it’s time to talk about compensation. Again, aim for a total compensation figure in the higher half of the range for your level.
Be solid and definite after you’ve decided on a number. Only bargain if you’re serious: you should be prepared to commit if the other side can get to your amount. If you still have concerns about the organization, address them first: you are not ready to negotiate.
Competing offers are the most surefire strategy to acquire extra money. Consider interviewing with your second or third-tier options or requesting a counter-offer from your present employment.
Recruiters can occasionally make offers over the band’s maximum limit, but this usually requires an extra level of approval reserved for applicants competing for solid offers.
If you can’t obtain what you want, offer to swap compensation components, but don’t give up overall compensation. Base pay, equity, and signing bonus are listed in order of difficulty. Offer to convert part of your base to equity first and then negotiate a more significant signing bonus as a last resort.
Say you’ve given the offer some thought and would want to talk about it in an email to the recruiter. Then, they’ll make an appointment to talk on the phone.
Never make a bluff about a competing offer. Recruiters are well aware of salaries at competing organizations and will detect deception.
Never negotiate through email: email isn’t an excellent way to encourage others to go beyond.
The Game Plan
Start by expressing how enthusiastic you are about the team and the position: you must convey that you’re a serious buyer.
Set a clear overall compensation target after that. When you receive criticism on a specific comp mix, always go back to the overall compensation figure.
Negotiating a good wage isn’t an antagonistic game of counter-offers; instead, make it apparent that you’re working together as a team to address a shared challenge.
Time can assist you in gaining additional leverage. Work your way down from salary, equity, and signing bonus until you have a comp mix that equals your overall compensation. If you can’t, be prepared to return, continue interviewing, and follow up in the coming days.
Mention that you have other job interviews scheduled, but you’d want to work for the organization. Make it plain to the recruiter that if he or she can acquire your entire compensation amount, you’re in.
Hello, Mark — I’m incredibly thrilled about the team, and I had a great time meeting everyone. I’m seeking a total compensation package of about $250,000. Would you consider a basic salary of $150k?
Well. We can only do so much for this job since it is so junior.
I don’t believe I’ll be able to accomplish that at this time; I’d need to be able to sign for $250,000. Is it possible for you to be more flexible with the equity?
How about an additional $20k in equity and the rest as a signing bonus? That would get us up to $250,000.
Hmm. That’ll be not easy, but I’ll see what I can do.
Okay, I get it. I’m more than willing to sign if we can get to that amount.
Send a follow-up email.
Subject: What’s Next?
How are you, Mark?
I’m ecstatic to be playing this position. We spoke about signing bonuses and more stock, and both of those topics came up throughout our conversation. To reach our goal of $250k in total compensation would be an honor.
I have a Facebook onsite coming up next week, but I’d want to be able to make it. So please let me know if you get a response from them shortly.
If you don’t hear back within a few days, contact them again. Make an effort to maintain a cordial friendship. The recruiter will most likely get you again at some time.
Hi, Jessica — I got the opportunity to talk with my compensation analyst. We can add $15k to our equity per year.
Amazing! Is it possible for you to provide a $50,000 signing bonus? That would get us up to $250,000. Thank you very much.
That seems possible.
Awesome. I’m all for it. I’m excited to get started! Please provide me with a written offer, and I’ll sign it right away.
Remember to have a precise aim and ask for what you want respectfully but confidently.