The term Total Compensation gets thrown around in the tech industry quite, but it took me a while to internalize what it really means. I wrote an article diving into what total compensation is, which I highly recommend you read. The article is published on the Levels.fyi blog because they collect and share data on compensation, making it easier to know how much you should be making.
This week’s edition of Hiring For Tech covers how to evaluate a job offer based on total compensation. First, a quick refresher if you haven’t read my article above (you should):
Total Compensation is the sum of all the different ways you are paid monetarily. This includes, but is not limited to: Base salary, Bonus, Equity (stock) compensation, Benefits
Now, suppose you have a job offer, and you want to know if it’s worth taking. More than anything, you should figure out if this company will give you what you want. If you’re lucky, you’re in a position to care about interesting problems, career growth, mentorship and company culture, instead of just about money. Whatever you want, make sure you’re getting that.
But, when you look at the finances (as is rational to do), you have a few different areas to consider:
If the company is public, how well is its stock doing and how well do you predict it will do during the time you plan to work there? Working at a high-growth public company where you have equity can be worth much more than the initial offer you get.
If the company is private, how much value do you expect to extract out of the equity you’re getting? Maybe the company is expected to IPO or get bought in a reasonable time frame, or maybe the company is an early one that’s years away from a liquidation event. Either way, you should consider what you actually expect to earn from the equity.
Benefits are important to consider as well. From personal experience, I know having good health insurance brings a lot of peace of mind, and other benefits may be important to you personally.
When negotiating, these areas are also levers to pull: you can ask for more salary, or more stock. But, one strategy is to ask for a higher total compensation, and let the company figure out how to reach it!
Understanding total compensation will help you compare job offers and find the company that makes the right trade-off for you. As I said in my article:
One of the mistakes I made earlier in my career was to compare my LinkedIn base salary with the base salary of a startup. The startup matched my base salary, which made me very happy, but I didn’t realize the money I was leaving on the table in the form of stock. […] I still probably would have made the [switch] for non-monetary reasons, but I wish I had gone in making a well-informed decision.