When you receive your compensation package, you’ll be leveled at a band, which comes with a range; for example, associate product designer makes $100K–$110K base salary compared to a product designer who might make $110K–$125K. In general, the company that you’re considering should have an objective standard for determining salary ranges, and you can always ask how they’ve arrived at their decision.
Years of design work serves as a rule of thumb when it comes to compensation, but years of experience doesn’t always equate to expertise. Ability to ship products that led to phenomenal outcomes does. Prove that you can perform at a certain band and have deep expertise that the company doesn’t have—you’ll get compensated appropriately.
Base salary is usually shown as a pre-tax annual number. If you’re moving to a new area, be sure to factor in your cost of living plus various taxes. According to Hired’s State of Salaries 2019 report, the average tech salary is highest in the SF bay area at $145K. However, Austin, TX, wins out since it has a better cost of living and so the same salary brings more purchasing power. In addition to your base salary, it’s helpful to understand how often the company does performance reviews, as these are additional opportunities to recalibrate your salary. Typically they happen either once or twice a year.
You may also get a one-time signing bonus, usually conditionally if you stay on for the full year. Sometimes you may also get a promise of a performance bonus at the end of the year, so you can ballpark how much potential extra money you might get. Take that with a grain of salt though—these bonuses are not guaranteed.
When we think of compensation, benefits don’t immediately come to mind. However, getting benefits like medical insurance coverage can quickly add up, helping you save $15,000 or more for individual coverage.
Some other perks that you might encounter:
401K budgets to help you manage retirement.
Learning budgets that you can spend on workshops or conferences.
Snacks and lunches at the office saving you both time and money.
Discounts with other partner companies.
Quantifying benefits and their financial impact can be tricky, but you can always do some back-of-the-envelope calculations to rough-size the money and time you can save.
In addition to offering salaries, companies, especially startups, offer equity as another form of compensation. Typically, early-stage companies weigh heavily on equity but pay lower in base. Of course, this isn’t legal or investment advice, so always check with your lawyer and/or if you have questions.
Generally, you’ll encounter these equity types:
Public stock. Although the stock price of a company will vary over time, the benefit of public stock is obvious: it’s real money that’s worth something today.
Restricted stock units (RSUs). You wait to get the shares, and once they vest, you don’t need to buy them.
Incentive stock options (ISOs). You get the right to buy shares in the future with a preferential tax treatment. Your offer will state how much you will have to pay per share (strike price), but you will have to fork over some cash to get your equity.
To understand how much your equity is worth, you’ll need to understand how much you’re getting out of a total pool of options outstanding and how much the company is currently valued at. You’ll also need to have conviction that this value will rise over time (hopefully in part due to your efforts). You may also want to talk with your recruiter or your future manager about how much your shares are valued at a specific valuation to determine how much you could stand to make as the company grows.
You don’t get equity all at once but instead accumulate it over time—aka vesting. A typical vesting schedule is four years, which means you’ll get all of your shares in four years. Usually there’s a one-year cliff where you get 25% of your equity package at the end of year one. After that you get 1/48 of your equity vested every month until you reach year four.
While it’s exciting to work for startups, the chances of making it big are rare. The reality is that nearly all startups fail, some break even and get acquired, and a select few hit it big. Even with the select few, 2019 was a year of lackluster IPOs as companies’ stock significantly decreased after going public. That said, Facebook’s IPO wasn’t an early blockbuster success either. So treat equity as a nice bonus, not as a 100% sure thing.
If you want to learn more about how equity works, take a look at Holloway’s Guide to Equity Compensation. Candor also has an article on equity education, and they provide a nifty equity calculator to help you figure how much your equity is worth.