Understanding Your Offer
When you receive a job offer in tech, the number they tell you on the phone is almost never the full picture. A 150k in total compensation at a small company, or $250k+ at a company with strong equity and bonuses. Understanding how to read an offer — every component, every catch, every gotcha — is the first step to knowing whether a deal is good.
The Components of a Tech Offer
A standard tech compensation package has five components:
Total Compensation (TC) = Base Salary
+ Signing Bonus
+ Annual Bonus
+ Equity (RSUs or Options)
+ Benefits
Cash Compensation = Base Salary + Signing Bonus + Annual Bonus
Each of these has different characteristics in terms of reliability, tax treatment, and real value.
Base Salary
Base salary is your guaranteed annual pay, delivered in equal installments (biweekly or semi-monthly). It is the most reliable and predictable component of your compensation.
$180,000 base salary:
Biweekly gross: $6,923 (26 pay periods)
Semi-monthly gross: $7,500 (24 pay periods)
After federal + state tax + FICA (rough estimate, single, CA):
Biweekly net: ~$4,600
Semi-monthly net: ~$5,000
Base salary matters because it is what your 401k contributions, life insurance, and disability benefits are usually calculated against. It's also the number your future employers will try to anchor to.
Signing Bonus
The signing bonus is a one-time cash payment, typically paid within your first 1-3 months. It serves two purposes: incentivize you to accept the offer, and compensate for compensation you're leaving behind at your current employer (unvested equity, pending bonus).
Key details most people miss:
Signing bonus: $50,000
Clawback clause: If you leave within 12 months, you repay 100%.
If you leave within 24 months, you repay 50%.
(Read the fine print — this varies by company)
Tax treatment: Taxed as supplemental income.
Federal withholding: 22% (up to $1M)
Plus state tax + FICA.
Actual tax may be higher at settlement.
You receive: ~$32,000 after withholding on a $50k bonus
The clawback clause is important. If you sign on, get a 50k — with pre-tax dollars. You received 50k back. This means you're effectively paying $18k out of pocket. Factor this into any decision to leave early.
Annual Bonus
Annual bonuses are typically expressed as a percentage of base salary and depend on both company performance and individual performance.
"Target bonus: 15% of base salary"
Base salary: $180,000
Target bonus: $27,000
What "target" means:
Company performance multiplier: 0.8x - 1.2x (typically)
Individual performance multiplier: 0.0x - 1.5x (typically)
Realistic range: $0 to $40,500
Expected value: ~$27,000
Most common outcome: 90-110% of target
The word "target" is doing a lot of work. It means "if everything goes well." Some years it will be higher. Some years the company misses targets and you get 60% of the stated number. In a bad year or a layoff-adjacent situation, you might get zero.
When comparing offers, value the annual bonus at about 80-90% of the stated target. It's likely but not guaranteed.
Equity: RSUs
Restricted Stock Units (RSUs) are shares of company stock that vest over time. They're the component that creates the biggest gap between "good" and "great" offers in tech.
RSU grant: $200,000 over 4 years
Standard vesting schedule (most companies):
Year 1: 25% ($50,000 worth of shares)
Year 2: 25% ($50,000)
Year 3: 25% ($50,000)
Year 4: 25% ($50,000)
Amazon-style back-loaded vesting:
Year 1: 5% ($10,000)
Year 2: 15% ($30,000)
Year 3: 40% ($80,000)
Year 4: 40% ($80,000)
Critical things to understand about RSUs:
- The dollar amount is calculated using the stock price at the time of the grant. If the stock drops 30%, your grant is worth 30% less.
- RSUs are taxed as ordinary income when they vest. A 32-35k after tax.
- At public companies, you can sell immediately upon vesting. At pre-IPO companies, you cannot sell until a liquidity event.
- Unvested RSUs disappear when you leave the company. This is the "golden handcuffs" effect.
Equity: Stock Options
Stock options give you the right to buy shares at a predetermined price (the strike price). They're more common at startups than public companies.
Option grant: 10,000 shares
Strike price: $5/share
Current FMV: $5/share (at grant time, these are "underwater" at zero spread)
If company reaches $50/share:
Value: (50 - 5) * 10,000 = $450,000 (before tax)
If company stays at $5/share:
Value: $0
If company goes to $0:
Value: $0
Options are a bet on the company's future. At established public companies, RSUs are almost always preferable because they have guaranteed value (as long as the stock price is above zero). At early-stage startups, options are the standard, and their value ranges from life-changing to worthless.
Benefits
Benefits are real compensation that most people undervalue:
Common benefits and approximate annual value:
Health insurance (employer portion): $8,000-$15,000
401k match: $5,000-$15,000
HSA employer contribution: $500-$1,500
Dental + vision: $500-$1,500
Life insurance: $200-$500
Disability insurance: $500-$1,500
PTO (if more than standard): Varies
Parental leave: Varies
Education/learning budget: $1,000-$5,000
Home office stipend: $500-$2,000
Commuter benefits: $1,500-$3,000
Free meals (on-site): $5,000-$10,000
A 401k match of "50% up to 6% of salary" on a 5,400/year of free money. If you don't contribute at least 6%, you're leaving that on the table.
Total Compensation: Putting It Together
Offer comparison example:
Company A Company B
Base salary: $180,000 $160,000
Signing bonus: $20,000 $50,000
Annual bonus: 15% ($27,000) 10% ($16,000)
RSU (annual value): $50,000/year $30,000/year
401k match: $9,000 $5,400
Year 1 TC: $286,000 $261,400
Year 2+ TC: $266,000 $211,400
Company A looks worse on base salary but is significantly better on total compensation, especially in year 2+. Never compare offers on base salary alone.
What "Up To" Means
When an offer says "bonus up to 20%," it means 20% is the maximum, not the expected value. When it says "target bonus of 15%," the target is the expected value at normal performance. These are different:
"Up to 20%": expected value is probably 10-15%
"Target of 15%": expected value is probably 13-17%
"Guaranteed 10%": expected value is exactly 10%
Always ask: "Is this a target or a maximum? What percentage of employees hit the target?" The answers tell you the real number.
Reading the Offer Letter
The offer letter (or formal offer document) contains legal language that matters. Read every word before signing.
Key things to check in the offer letter:
Employment type: At-will? Contract? Fixed term?
Start date: Can it be adjusted if needed?
Base salary: Matches what was discussed verbally?
Equity grant: Number of shares/units, vesting schedule,
grant date (the price may be set at a
future board meeting for startups)
Bonus structure: Target percentage, when it's paid,
pro-ration for partial years
Signing bonus: Amount, payment timing, clawback terms
Non-compete: Does it restrict future employment?
(Unenforceable in CA, but exists elsewhere)
IP assignment: Does the company claim ownership of ALL
your work, including side projects?
Arbitration clause: Are you waiving your right to sue?
At-will language: Standard but worth understanding
Pay special attention to IP assignment clauses. Some companies claim ownership of anything you create during your employment, even on your own time with your own equipment. If you have side projects, negotiate this clause or get a written exception before signing.
Common Pitfalls
- Comparing on base salary alone. Two offers with the same base can differ by $100k+ in total compensation. Always compare TC.
- Ignoring the signing bonus clawback. That $40k signing bonus is a loan with strings attached if you leave early. Read the terms.
- Valuing pre-IPO equity at the company's stated valuation. Startup equity is worth zero until a liquidity event. Discount it heavily or treat it as a lottery ticket.
- Forgetting that RSUs are taxed at vest. A 50k in your account. Expect $32-35k after withholding.
- Not asking about refresher grants. Your initial RSU grant vests over 4 years. What happens in year 3 and 4 when the cliff is over? Good companies give annual refresher grants. Bad ones let your equity compensation drop off a cliff.
- Overlooking benefits. A 401k match, HSA contribution, and good health insurance can be worth $15-25k per year. Don't ignore this in comparisons.
Key Takeaways
- Total compensation has five components: base salary, signing bonus, annual bonus, equity, and benefits. Evaluate all of them.
- Base salary is guaranteed. Everything else has conditions, variability, or risk attached.
- RSUs at public companies have real, quantifiable value. Stock options at startups are speculative. Discount startup equity accordingly.
- Always compare year 1 TC and year 2+ TC separately, since signing bonuses inflate the first year.
- Ask specific questions: Is the bonus a target or a maximum? What's the vesting schedule? Is there a signing bonus clawback? What are the refresher grant norms?