Understanding Your Job Offer – It’s Not Just About the Salary was originally published on 81cents.
One of the most common mistakes we see early-career professionals make when negotiating is focusing too singularly on base salary. While it’s an important part of your compensation (and very likely one you should negotiate!) – there are many other parts of compensation that can both meaningfully impact your income – and your quality of life at work.
Below we’ll explain the different types of compensation – and share some real examples of compensation packages from employers like Amazon and Google.
The Three Categories of Compensation
We tend to think about compensation in 3 major categories:
Monetary – Monetary compensation means compensation that allows you to put more money into your back account every year. Common examples of monetary compensation include base salary, bonus, and signing bonuses.
Near-monetary – Near-monetary compensation is any type of pay that ultimately leads to you having more money – but in an indirect way. For example – if your employer gives you free lunch three times a week – that’s three days where you don’t need to spend money buying lunch or groceries. A $15 or $20 savings every week adds up and could mean an extra thousand dollars at the end of the year! Other examples of near-monetary compensation include a generous relocation package, commuter benefits, and healthcare.
Non-monetary – Near-monetary compensation are other types of compensation you receive as a part of doing your job that don’t necessarily have a financial impact. Examples of non-monetary compensation include paid time off (PTO), budget for professional development, opportunities for international travel, etc. Non-monetary compensation can meaningfully impact your quality of life and satisfaction in your role since research shows that the majority of people look for new jobs – not because of feeling underpaid – but because something about the role or company culture doesn’t work for them.
When evaluating a potential job offer, it’s helpful to look at the compensation offered across all three categories.
Types of Monetary Compensation
Below we’ll overview the different types of (monetary) compensation.
Base salary – A base salary is the primary form of pay for the majority of full-time roles. Base salaries are typically paid out of every two weeks.
Depending on the size of the company, the employer may have “caps” or “bands” for each role and level.
In certain states (CA, CO, CT, MD, NV, RI) companies are required to provide salary ranges on job postings. You can also try asking the recruiter you’re working with if there’s a range that they can share for the role.
Performance bonus – A performance bonus is extra compensation given out (often at the end of the year) tied to your or the company’s performance – or sometimes both. Not all companies have performance bonuses, however in most cases when they are present, they come in the form of a percentage of your base salary (ex. A performance bonus that’s 15% of your base salary). This is part of why it’s important to negotiate your base salary because doing so means you’ll also have a higher performance bonus, too!
The performance bonus is usually a set percentage attached to your level and is non-negotiable.
Signing bonus – Most large tech companies (but not all) offer signing bonuses – effectively an extra one-time cash bonus to motivate you to sign your offer. This tends to be one of the more negotiable types of cash compensation since it doesn’t recur and therefore companies don’t need to worry about how it will affect how much they need to pay you in future years.
Signing bonuses are awarded in the form of cash in most situations and are typically only applicable for the first year, however some companies have 2-year signing bonuses (ex. Amazon). Many companies pay it in full upfront but some pro-rate it over the year (similar to a base salary).
Late stage startups also usually offer them, however they are less frequent at small startups.
Note that although the signing bonus is something many companies may offer as part of their compensation package, it’s often left out of the initial offer and is something to both ask about and negotiate!
Relocation – Some companies will offer a relocation package as a component as well if you have to move to a different city for the role. This will often be a standard package depending on how many people are relocating. In certain situations, it may be something you have to flag to the recruiter and ask for.
Equity – Almost every tech company offers equity (or stock) for technical roles and most non-technical roles. Being given equity in a company means you’re being given ownership of (or the chance to own) a very, very small piece of the company.
Equity is usually awarded over time (called a ‘vesting schedule’). You don’t receive 100% of what you’re given on your first day at the company – just like you’re not given your full base salary. Instead, it’s given out over time.
Let’s say, for example, that you get an offer from a company that includes an equity grant valued at $60,000 vesting evenly over 4 years (25% each year). In this scenario, at the end of your first year of work at the company, you will have earned 25% of the $60,000 = $15,000. That is the amount that is vested after the first year.
At public companies, you will now be the owner of the equity and have a chance to keep it – or sell it. However, at a private company, although you may own the equity you will likely not be able to sell (or liquidate) your shares.
Equity is unfortunately both very complicated and an important part of compensation in tech. We recommend spending time to learn more about it (here’s a really informative guide) and also asking questions to be able to better evaluate your equity:
- What type of equity are you receiving? (RSU vs options)
- What’s the vesting period of the equity? (typically 1 year to 4 years)
- What is the vesting interval? (i.e. monthly, quarterly)
- What is the value of the equity? (RSUs = public market valuation, options)
Example Amazon & Google Offers
Below you’ll find two real compensation packages – one from Amazon and one from Google.
Regardless of what company you’re considering joining – the very first step of negotiating your pay is making sure you clearly understand the compensation you’re being offered (across all dimensions).
The components we discussed above are all part of the way Google structures their offers:
- Base: There is a base salary range for each role/level/and location.
- Annual Bonus: Google offers performance bonuses based on the position and level. It’s common for this to be between 15% – 20% of your annual base salary based on the seniority of the role.
- Equity: Google gives out equity over 4 years but employees earn the majority of the equity in the earlier half of the 4 years. The vesting schedule is as follows: 33% vests in the first year, 33% in the second year, 22% in the third year, and 12% in the fourth year.
- Signing Bonus: Signing bonuses at Google are often not included in initial offers, however most competitive ending offers will have a signing bonus.
Recently we saw a recent grad who joined Google as a Software Engineer (a Level 3 role) in San Francisco receive an offer of:
If we were to calculate what the value of the offer is for the first year, it would look like:
- Base salary = $150,000
- Annual bonus of 15% of the base salary = $22,500
- Equity of $206,000 where 33% vests in the first year which equals $67,980
- Signing bonus of $25,000
$150,000 + $22,500 + $67,980 + $25,000 = $265,480
The first year value of the offer is $265,480.
Amazon
Amazon structures their offers slightly differently. They include 3 of the 4 components discussed above, but leave out performance bonuses.
- Base: All roles have a base salary that is linked to your role, level, and location.
- Equity: Amazon’s equity is back-loaded and vests over 4 years, meaning the majority of it becomes yours in the 3rd and 4th years. The vesting schedule is as follows: 5% first year, 15% second year, 40% third year, and 40% fourth year.
- Signing Bonus: Amazon usually has larger signing bonuses than are common across the industry, and they are granted over your first 2 years of employment to compensate for the lower equity in those years. These are paid out monthly with your salary rather than upfront.
Recently we saw a recent grad who joined Amazon as a Software Engineer (a Level 4 role) in Phoenix receive an offer of:
If we were to calculate what the value of the offer is for the first year, it would look like:
- Base salary = $146,000
- Equity of $120,000 where 5% vests in the first year which equals $6,000
- Year 1 Signing bonus of $57,000
$146,000 + $6,000 + $57,000 = $209,000
The first year value of the offer is $209,000.
While negotiating can feel overwhelming and nerve-wracking it’s also incredibly rewarding and impactful and we see hundreds of people do it every year! Temporarily stepping out of your comfort zone and advocating for yourself may lead to lessons and rewards that will pay off substantially in the long term. For more information on compensation structure and negotiations, visit Rora!
Note – the information mentioned above is from publicly available information. We are not affiliated with any of the companies mentioned above.
