Total Compensation vs. Base Salary
Base salary is the fixed amount on your pay stub. Total compensation includes everything your employer pays or grants to you: base salary, bonuses, equity, retirement contributions, and benefits. At some companies — especially in tech and finance — total comp can be 50–200% higher than base salary alone.
Types of Variable Compensation
Annual Bonus
A cash payment, typically paid once per year, based on individual performance, company performance, or both. Common bonus percentages by level:
| Level | Typical Bonus (% of base) |
|---|---|
| Individual contributor | 5–15% |
| Manager | 10–25% |
| Director | 20–40% |
| VP and above | 30–100%+ |
Bonuses are taxed as supplemental income (typically 22% federal withholding for amounts under $1 million).
Restricted Stock Units (RSUs)
RSUs are shares of company stock granted to employees, typically vesting over 3–4 years. At major tech companies, RSU grants can exceed base salary. For example, a senior engineer with a $180,000 base might receive $400,000 in RSUs vesting over 4 years — adding $100,000/year to total comp.
Key RSU details:
- Taxed as ordinary income when they vest (not when granted)
- Value fluctuates with stock price — your actual payout may be more or less than the grant value
- Most companies use a 4-year vest with a 1-year cliff (25% vests after year 1, then monthly or quarterly)
Stock Options
Stock options give you the right to purchase company stock at a set price (the "strike price"). If the stock price rises above your strike price, the difference is your profit. Options are most common at startups and can be extremely valuable if the company succeeds — or worthless if it does not.
- ISOs (Incentive Stock Options) — favorable tax treatment, but subject to AMT
- NSOs (Non-Qualified Stock Options) — taxed as ordinary income on exercise
How to Value an Equity Offer
When evaluating a job offer with equity, ask these questions:
- What is the current valuation and your percentage ownership?
- What is the vesting schedule?
- For startups: what is the last funding round valuation, and what is a realistic exit scenario?
- For public companies: what is the current stock price, and what has the 3-year trend been?
A common mistake is valuing startup options at the latest round's paper value. In reality, most startups fail or produce modest exits. A reasonable rule of thumb: value startup options at 10–30% of their paper value for negotiation purposes.
The Total Comp Comparison Framework
When comparing two offers, create a total comp spreadsheet with: base salary, expected bonus (at target), annual equity value (grant / vesting period), employer 401(k) match, health insurance value, and any other monetary benefits. This gives you an apples-to-apples comparison that goes far beyond the base salary number.