Congrats, you got the offer! What now? There are two parts: handling the offer itself, and understanding the compensation package that comes with it.
Offer of Employment
- Offer Deadline
The recruiter or hiring manager likely called or emailed you to share the good news. If they haven’t already, they asked about salary expectations, start date, and other details. Hopefully you read this blog first!
At this point, it makes no sense to accept on the spot. Ask for a reasonable amount of time to respond (a few days to a week, more with good reason).
That offer likely came with some kind of deadline. That is probably because the offer includes equity (stock options/grants), which we’ll get to in a second. If you miss that deadline, you don’t miss the chance to work there - they’ll just have to write up another offer.
This part (negotiating your personal market value), is of course totally foreign to servicemembers. Compare your offer to:
- Online research (Quora, Glassdoor, etc.)
- Mentor opinions (with knowledge of the industry)
- Levels.FYI Compensation
Making a Counteroffer: this is very situation-dependent. Unless your demand is wildly unreasonable or made in an impolite manner, it should at worst be declined, which puts you in the same situation you are now. Some general advice:
- If this is a venture-backed startup, pay bands and equity offers may be tightly controlled or even prescribed by the VC’s. If that’s the case, you can ask for more money but you can’t possibly get it.
- Even at a big company, they have pay bands they’re stuck between. They will probably tell you about those, but like any good recruiter, may not be honest about them…
- You can dodge these constraints by negotiating other benefits: better bonus payout schedule, vacation time (although asking for much more might not be the best way to start a new job), more relocation allowance, etc.
My best advice: like any other kind of negotiation, showing your cards can go a long way here instead of arbitrarily asking for more in a back-and-forth, who-blinks-first standoff. If you have other offers, be upfront about those, and explain where your decision points are.
With that being said, it’s a lot easier to get that raise now than later!
Forget What You Know About Pay
Software engineers exist on a different plane of compensation than most other jobs. Research market rates and don’t base your asking salary off of your military pay, even remotely. Dan Luu is on the mark: mid-career pay in Big Tech is $250k - $350k. However, also compensate for the fact that your effective tax rate is about to get a significant hike without active duty exemptions.
Your offer will consist of (up to) four parts:
- base pay (aka salary)
- starting cash bonus
- stock options or RSU’s
- other benefits, like health insurance, transportation, education allowance, and relocation
The proportion among these will vary among companies and also by the recruiter’s or hiring manager’s perception of what’s important to you. Evaluate offers against each other based on this total compensation number, not any single component. Further, evaluate stock options at their current value, not the inflated number or optimistic prediction the recruiter might give. Unless you’re at an early-stage startup, in which case you should evaluate options at $0.
Some of these will come with payout schedules - if you don’t stay at the company long enough, you might have to pay them back when you leave.
Stock Options & Grants
Smaller companies give stock options, which are the right to buy stock in the future for some set price. At a rapidly growing startup, your buying price (the strike price) will ideally be far below the market value of the options by the time you cash them in. Larger companies just give you the stocks outright (RSU / “grant”), and all you have to pay are the taxes.
How to evaluate options:
- Decision period: in some cases, you have a short window after leaving the company in which to decide whether to exercise (buy) your options. Since everyone leaves every company eventually, a longer decision period keeps you from having to make an expensive ($100,000+, possibly) gamble right as you’re switching jobs. If you are forced to exercise, and the company tanks, you paid for nothing. Uber’s is famously short.
- Vesting schedule: you progressively earn the right to these options/grants as you continue employment, so you can’t walk in the door and walk back out with a piece of the pie. A generous schedule might be 25% after the first year, with the rest doled out monthly until 4 years; more restrictive might be vesting at longer intervals, like 6 months to a year, which will force you to time your eventual departure to match. Amazon’s is skewed to favor long tenures, vesting only 5% in the first year and 15% in the second.
- Your Plans: if you don’t plan to stay at the company long enough to vest significant amounts, then account for that in your offer comparisons.
The quality of insurance plans varies widely among companies. The best source for information about a particular plan is employees themselves, who will probably be open about it in interviews. For example, Palantir is known for having a very generous cost-free plan, while Amazon has more expensive options that cover less.
Next: Getting to Work