Compensation
When you receive your offers (congrats!), it is important to understand your offered compensation. This will help you compare different offers better and avoid a lot of possible mistakes.
There are two main parts of the compensation: base salary and stocks. Let's consider them in detail.
Base salary
Base salary is the usual salary that you receive month to month. For software engineers in a good company, it should typically start from at least 100000$ in the US, and from at least 50000-70000$ in Europe.
Stocks
Company stocks are an important part of the compensation of software engineers in a lot of companies. Usually, you will be given a predefined amount of stocks in your offer.
It is important to understand if the stocks you will get are "liquid", meaning that you can sell them, and what they are worth. If the company is public and its stocks are traded on the market, you can usually sell your stocks whenever you want. Google "Company X stock price" to check if the company is public and what the stocks cost.
If the company is still private and not trading its stocks, stocks that you will get don't really cost anything yet. It may take years for the company to become public and for you to sell your stocks. Remember also that most private companies never make it to the IPO and never become public.
Often, especially when the company is not public, instead of stocks you may get stock options – a right to buy some amount of company stocks at a fixed price later. This fixed price may be lower than the stock market price in the future, which will give you profit. Remember that stock options are not stocks, and you will have to spend some amount of money if you want to receive the actual stocks later.
Finally, one of the most important aspects is when and how you will get your stocks. In tech, the usual practice is to give you a four-year stock grant, meaning that you will receive some amount of stocks once a year for four years (you usually get a new stock grant after that). For example, if you receive a four-year stock grant with 1000 stocks, you will get 250 stocks once a year for four years. If you leave the company earlier, you lose the portion of the stock grant that you didn't yet receive – this way companies incentivize its employees to work for them longer.
Your stock grant timeline and distribution may differ, so make sure to find out and understand all details. Stocks are an important part of the compensation, and often take something like 30-50% of the total amount of money you earn.
Other compensation parts
There are many other compensation-related things that are important to understand.
Signing bonus. It is a common practice to receive a so-called signing bonus – a one-time bonus you get when you join the company. It can be in the range of tens of thousands of dollars, so you should check if your company has one.
Yearly bonus. In a lot of companies, it is a usual practice to give engineers a 10-15% salary bonus every year.
Relocation bonus. If you are moving to another city or country, the company may provide a relocation bonus to help you cover the moving costs. If you will need to move for a job, ask the company about this.
Health insurance. Whether the company will provide health insurance can be very important, especially in a country without good public healthcare – for example, in the USA.
Benefits. Find out what other benefits the company has. It can be free lunches, gym membership, money for public transportation, and so on. While these are smaller details, they can contribute a lot to your daily work life.
Vacation. While not a part of compensation, vacation is an important aspect of your job. Find out what is the vacation policy of the company – how much vacation will you have and when you can take it? The typical vacation amount is something like 15-20 days a year in the US, and 28-35 days a year in Europe.
Other leave policies. Does the company have a lot of sick leave days? What about maternity and paternity leaves? These may be very important depending on your situation.
Taxes. It is important to understand your taxes, especially if you will need to move to another country. What is the typical amount of taxes you will need to pay?
Read more
The information above is just a very brief introduction to the details of the compensation. You can read the following resources to understand more:
Levels.fyi – here you can see and compare compensation numbers in different companies.
Blind – a lot of people post their compensation details here. For example, you can read this post listing offers in different companies.
Glassdoor – you can read reviews about different companies here, and find out a lot about company compensation policies.
Nice equity compensation guide, read it to learn more about stocks, taxes, and so on.
- What are the base salary and stocks?
- What are stocks and stock options? What is the difference?
- What is the difference between a private and a public company? What is IPO?
