Total Compensation Is A Lie

More like a half-truth.

Photo by Dan Dennis on Unsplash

As someone who has been actively job-seeking for the past few months (thanks layoffs!), and having been involved in hiring and recruting tech talent for long before that, there’s been a trend emerging in the job market that is actively hurting job seekers and benefitting companies in ways that may not be immediately available: negotiating offers in terms of “total compensation”.

For those who aren’t up and up with the terminology or maybe haven’t had the misfortune of being suddenly laid off and need to find a new job ASAP, the concept of total compensation (or “total comp” as I’ll be referring to it) is basically the total dollar value of the entire compensation package in an offer: base salary, bonus, and equity/stock all rolled into a single number. On the surface, this might seem innocuous, but companies are smart and are finding ways to abuse this to benefit themselves and avoid paying engineers what they’re worth. For illustration, let’s take a look at two hypothetical [but fairly typical] comp packages for the same position at two different companies:

Foo Industries

Base Salary: $150,000
Bonus: 20% annual based on company performance
Equity: 1,000 RSU @ $70/share (pre-IPO)
Total Compensation: $250,000

BarBazTech

Base Salary: $100,000
Bonus: 20% annual based on individual performance
Equity: 5,200 RSU@ $25/share (pre-IPO)
Total Compensation: $250,000

Both offers have the same amount of total comp but the actual take-home pay is wildly different. Looking closer we can see that BarBazTech has opted for a lower base salary in lieu of a greater equity/stock award. For a small startup, this might make sense — cash flow is hard to come by, and rewarding early hires for sticking with the company by giving them lots of equity makes sense, especially if you can afford that route early on.

But.

Companies across the board are doing this now, too. While the total comp numbers might stay the same or even be rising, the actual base pay numbers are falling. What they’ve figured…