Salary Negotiation
Compensation Breakdown
Understanding the components of your compensation package - base salary, equity, sign-on bonus, and performance bonus - and how to negotiate each part.
Time to get into the nuts and bolts. Let's break down the various components of your compensation package and better understand how to negotiate each part.
Base Salary
Base Salary will always be the most complicated figure to influence. It is a compounding variable cost for the company, because it proportionately connects to other costs (i.e. percentage based bonus, percentage based raises, 401k contribution, etc.).
Fun Fact
Up until February 2022, Amazon capped Base Salary pay at $160k. That figure has since more than doubled up to $350k to more closely reflect competitive packages around big tech.
Equity
Equity is typically the easiest figure to budge. It represents the lowest risk for the company with a future, not immediate cost. Minimum vesting thresholds (correlating to time of service) need to be met prior to payout; additionally, these awards can be given with their future projection in mind, rather than their current value (again a risk mitigating tactic for the company).
You'll need to know exactly how shares are being valued and the conditions of the equity vesting schedule. For example, Meta will calculate equity using the average share price of the previous calendar month; Amazon on the other hand will project equity at various vesting dates. As non-public companies, OpenAI and Anthropic have completely different structures.
Sign-On Bonus
Sign-On Bonus is a one-time lump sum fee that can be used to bridge gaps in total compensation ask, equity or bonus sacrifices from current employer, relocation fee or insurance inadequacies, etc. While base salary and equity negotiations result in recurring annual value, the sign-on bonus will only affect the first year. The upside is that this form of compensation is typically immediate and liquid (Amazon being an exception).
Performance Bonus
Performance Bonus is a yearly sum earned on top of base salary. There is typically a target percentage of base salary that is modulated depending up on the individual, team, or company performance. While bonus percentages are typically tied to level assessment (and thus non-negotiable), they do make up a substantial portion of total compensation.
Have a conversation with your prospective manager about the expectations of your role. Try to get a sense of what success looks like both for you and for your team. This discussion can indicate how to weigh performance bonus in your overall assessment of total compensation.
Negotiation by Component Matrix
| Type | Order | Difficulty | Impact |
|---|---|---|---|
| Base Salary | 1 | High | High |
| Equity | 2 | Medium | High |
| Sign-On Bonus | 3 | Low | Low |
| Performance Bonus | n/a | n/a | Medium |
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