How to evaluate and negotiate a job offer

What compensation should you ask for? When and how should you ask? What even is equity? I asked our Hiring Partners, so you don’t have to.

 

Everyone feels cringy talking about money. Amidst the hiring process’ whole tangle of anxiety-inducing conversations, compensation reigns supreme. But it shouldn’t! Everyone knows you aren’t going to work for free. The sooner you get the compensation details, the sooner you can proceed (even if that means declining to continue with the interview process). The best way to get into it is to know your worth, be prepared to talk about your requirements, and understand the terminology. I spoke with WhoCo Hiring Partners Kristin Staunton and Andrea VanderStelt to get the lowdown. Here’s what they want you to know.

First of all, compensation isn’t the same as salary

People tend to think of compensation and salary interchangeably, and they aren’t. Salary is a critical part of your compensation, but total compensation is what really matters. Go into the process with an open mind about the total package of the offer. Of course, you’ll have a base salary you’re shooting for. Still, if it’s not as much as you were hoping for, there are always other things to look at besides base pay: Benefits, bonuses, commission, equity, flexible hours, or growth opportunities, to name a few.

So, when comparing your current position to the one you’re applying for, you should keep your total compensation in mind. And if you’re working with a recruiter, make sure they have a good picture of where you are with your pay and benefits, so they have a starting point for helping you find your next role. It may help to prioritize all of the elements of your compensation for them. For example, if it’s a dog-friendly office, you may let the possibility of working remotely slide. If they have on-site child care, you could deal with slightly less flexible hours. If they have extended health benefits like a gym or massages, you could shave a few bucks off your target salary.

“A holistic understanding of your compensation helps us think more broadly about the jobs you’d be excited to consider,” says WhoCo Senior Hiring Partner Kristin Staunton. “Try to think through everything you’d get from a job, like personal satisfaction, a rewarding career path, and maybe the opportunity to travel, along with everything you need, like salary, benefits, and time off. You can even prioritize or rank the importance of these things if that’s helpful. Also, if a benefit covers something you already pay for, it loosens up your budget for spending elsewhere. That’s how to think about it. That’s where the give and take come in.”

For example, flexibility—choosing where and when you work is a huge benefit, especially for people with dependents to care for or with limited access to transportation. Working from home means you can have your job and get a puppy, too.

“If a benefit covers something you already pay for, it loosens up your budget for spending elsewhere. . . That’s where the give and take come in.”

When recruiters talk about thinking about compensation broadly, it helps to know what your options are. Essentially, anything you get back from working in a job counts.

Your starting point is the base salary

A wide (and personal) array of factors will help you determine your base salary's low end. Are you comfortable with the salary you’re making now? How low could you afford to go for your dream job? Everyone has a lower limit; it’s best to find yours before you commit to a job you can’t afford. Before you consider a pay cut, take an honest look at your financial situation to make sure you’ll be able to make ends meet.

And why might anyone consider a lower base salary? Opportunities for career growth. Senior Director of Talent Services at WhoCo Andrea VanderStelt says: “I think in the long run, sometimes it’s worth it to take a small step backward in salary if there’s going to be opportunities to develop your career by taking on additional responsibilities. After a year or two in the new role, you may have achieved more than you could have in four years in a role with less responsibility.”

There are also opportunities with a growing company. But how can you find out if a company is on the rise? “One is the company’s trajectory. Are they looking for significant growth in the next 6-12 months? Are they adding a ton of headcount or have plans to grow the business in some significant way?” continues VanderStelt, “Whenever a company does that, there are opportunities for you to carve out more responsibilities for yourself. When a company is growing aggressively, there's almost always more work than there are humans to do it. So it’s an opportunity to do a great job with the duties you’re given, and to look for other tasks you can take on to help with that career growth, too.

Another way to find out if a company is a good bet is to talk to the hiring manager. Get a handle on their style of management and approach to mentorship. What do they do to help folks grow within their role and to help them move along a career path? Find out if the company has formalized a career growth plan for employees. VanderStelt has one caveat, “It’s also okay if it’s a startup and they don’t. Typically they won’t! But that means there’s an opportunity for you to carve your own path, to see opportunities as they arise and as the company has needs.”

But what to ask for in the first place? It’s assumed that if you’re reasonably happy where you are, you should expect a significant raise to move. When considering a job below your salary requirements, VanderStelt recommends asking if there’s flexibility with salary. Some clients are firm on salary and benefits, and others might budge for a real superstar. “People usually strive for a 10-15% jump when changing jobs. More than that is significant, but recruiters will recommend that if you follow great work that you love, the money will come!”

Other factors that may affect what you should ask for are market data and location. You can find out what other locals in your role are making using tools like LinkedIn, Glassdoor, and Indeed. When LinkedIn shares salary information, it isn’t the range that a company is offering, but an average of the self-reported salary ranges of people who have applied. But also, doing the groundwork of networking will help. Talk to other people who are in that role. Ask someone in your network what a fair compensation range is. You should get market compensation data if you're working with an agency recruiter. "Just having the conversations and interviews will go a long way to understanding what companies pay for a particular role." 

Location comes into play, and VanderStelt reports that sometimes it’s in unexpected ways. Because the era of remote work came on so suddenly, there is not yet a consistent way (among companies) to treat salary with regard to location. “Some companies will pay two people doing the same job the same amount no matter where they live, because their salary data is based on the market where the company is headquartered. Others may adjust salary based on where the worker lives. Meaning a company based in San Francisco might pay San Francisco market wages no matter where the candidate lives—even if you live in a city where rent is relatively less. Or they might pay less because you live outside of San Francisco, where the standard of living is relatively lower.” If you are exploring a remote job, it's completely fair to ask how they determine their salary levels.

When should you ask about compensation?

Don't wait until the end of the interview process. If comp isn’t included in the job description, Staunton says that a good recruiter will determine if your salary requirements are within range during your first meeting. “If the recruiter hasn’t mentioned it by the end of that meeting, it would be appropriate to ask. Just say, ‘Do you have a target range in mind for salary?’ No big deal. Surprises aren’t fun at the end of a long interview process.”

If the range wasn’t what you were hoping for, at this point, it’s also appropriate to ask about wiggle room or other benefits to supplement your salary.

What is equity and why should you care

It can be hard for candidates and recruiters alike to understand what equity could be worth. To understand that, you need to know the company's current valuations, what percentage of shares you'll be getting, and the potential for the company to hit its growth targets and increase in value.

Put simply, equity is partial ownership in your company in the form of shares. There are many things to learn about equity, but we’ll save them for another blog post. You may have some wiggle room to negotiate the equity in your offer, but many companies have strict guidelines based on the type of job and level you're coming in at. That said, understanding what's on the table can help you decide between multiple offers. At the very least, you should know what you’re getting before you accept. For this, we can keep it pretty simple. Think of equity as a pie. For now, all you need to know is what the pie is worth, how big your slice is, and how soon you can dig in. Carta’s helpful tool can help you figure out what your equity offer is worth.

Some things you should find out before you accept your offer:

What type of Equity grant is it? 

Also known as shares or options, equity grants are a bit of ownership in the company. Your equity grant agreement will tell you how many shares you’re getting, the price they’re issued at, and how long it will take to vest your shares.

There are two types of equity:

  • Stock options are usually offered by early-stage companies. Stock options are a right to buy a set number of shares at a fixed price (usually, hopefully, a low one). You don’t actually own shares of the company until you choose to “exercise” your options and purchase the shares. Typically options vest over a set period of time. They are taxed when you buy (or exercise) the options and when you sell shares.
  • Restricted Stock Units (RSUs) are usually offered by later-stage and public companies. These are special shares, similar to what you can buy in the stock market, but with specific restrictions, such as how they vest and in what situations you can sell them. Like stock options, they typically vest over a set period. They are taxed when you receive them and when you sell them.

How many outstanding shares are there?
Aside from knowing how many shares you’ll be offered, you should know how many other shares there are so that you know your percentage ownership of the company, and can calculate how much they might be worth. If you own 0.1% and the company has a value of $100M, your stake is 0.1% of $100M, which is $100K. 

When do your shares vest?
Vesting is when you officially own the equity you’ve been offered. This is different from liquidity, which is when you sell your shares. Typically employee equity vests quarterly over a period of four years with a one-year cliff. The cliff means you don’t receive shares during that first year but then earn one year’s worth of shares on your first anniversary. 

When will my shares be worth something?
Technically, while your shares will be worth something the day you join the company, you won't have access to their value until you sell them. If your company is publicly traded, you can sell your shares once they've vested and any other conditions are met. A private company must first go through a liquidity event, namely an IPO or being acquired by another company. Instead of asking, "when will my shares be worth something?" you could ask, "how and when does the company plan to achieve liquidity?" or "does the company plan to do an IPO or be acquired, and in what time frame?" While no one knows the future, most company leaders will be happy to share what they think likely scenarios and timeframes might be. 

Try this one crazy trick

From salary to benefits and equity—you might be feeling uneasy about the conversation. When considering a job offer and total compensation, Staunton has candidates replace the word ‘compensation’ with ‘satisfaction.’ “We spend a lot of time working, and what matters most is that your next opportunity makes you happy and fulfilled. Know your worth, and don’t be afraid to ask for more. But remember that money is just one factor among many to consider.”

Do your research, know your worth, and have the conversation early. You got this!