The #1 Rule Of Negotiation - How To Avoid Giving A Number

- Negotiation is a dance: Know your role within it and have a script.
- There's an asymmetry here:
  - Recruiters are talking to candidates and negotiating every day. They come in very prepared and have a script.
  - You will change jobs every 2-3 year - It's a rare event for you to have this conversation. To level the playing field, you should have a script too.
- If they ask for a number or range, say *"I'm more concerned with understanding if this opportunity is right for me."* This is polite while positioning yourself in a mutual respect scenario.
- If they refuse to move forward within a number, you can try:
  - "What are typical compensation bands for this role?"
  - "I'm a strong performer in my current role and expect to be promoted soon, so I'm not sure what's fair."
- If they require a number, put a placeholder and say you'll get back to it later
- Asking for a number is generally a predatory way for companies to take advantage of candidates and lowball them.
  - This is why in California, it is illegal for employers to ask your prior compensation information

Related resources:

- [\[Course\] The Insider's Guide To Negotiating Your Tech Salary And Compensation](https://www.jointaro.com/course/the-insiders-guide-to-negotiating-your-tech-salary-and-compensation/)
- ["Negotiation - done via phone call or email? Modes and stating a number?"](https://www.jointaro.com/question/ggYVsodBllba5RmYrOtv/negotiation-done-via-phone-call-or-email-modes-and-stating-a-number/)

The Key Insight Behind Negotiation

Negotiation is fundamentally about leverage, and the strongest leverage comes from being able to walk away. Timing, preparation, and understanding the multifaceted nature of compensation are key to negotiating effectively.

- **Leverage is built through optionality**: The ability to walk away—especially when holding multiple offers—provides the greatest negotiating power. Desperation weakens a candidate’s position.
- **Don’t discuss compensation too early**: Deflect pre-interview compensation questions by focusing on mutual fit. Only begin negotiating after a formal offer is made.
- **Confirmed offers reflect high value**: By the time a company extends an offer, they've invested significant time and resources. With a low conversion rate from interviews to offers, candidates who make it to the offer stage are rare and valuable.
- **Companies don’t rescind offers for negotiating**: Especially in big tech, it’s extremely rare for a company to withdraw an offer just because a candidate is negotiating for better terms.
- **Compensation has multiple levers**: Salary, equity, and sign-on bonuses are negotiable components. Candidates can prioritize based on their risk profile and financial goals, trading one component for gains in another.

Why You Should Always Negotiate Your Offers

- Negotiation is particularly life-changing, especially if you're early-in-career. It's also really high ROI as the cost is effectively just a couple emails and some potential awkwardness.
- Negotiation doesn't hurt anyone within or outside the company - It's effectively a part of life when it comes to the hiring game.
- What you negotiate for isn't connected to your costs: It's about getting what's fair given the market rate and your current leverage situation (i.e. do you have other offers).
  - Even if an offer is good given your personal situation, you should try negotiating, especially if it's below fair market rate for that level/company/geography and you have competing offers.
  - You can always do something with extra money!

If you need premier negotiation support, check out our 3+ hour negotiation course: [The Insider's Guide To Negotiating Your Tech Salary And Compensation](https://www.jointaro.com/course/the-insiders-guide-to-negotiating-your-tech-salary-and-compensation/)

How To Negotiate A Raise At Your Current Job

Sometimes the goal isn’t to leave a job, but simply to be paid more for the work being done. Negotiating a raise internally is possible, but the dynamics are more complex due to limited leverage.

- **Internal raises are harder without leverage**: Simply asking for a raise based on merit often fails because the company knows most employees won’t go through the pain of interviewing and switching jobs.
- **Competing offers create leverage**: The most effective strategy is to secure a higher offer elsewhere and use it to negotiate a raise. This shows initiative and forces the employer to evaluate retention costs.
- **Company policy plays a role**: Some companies, like Facebook, may have policies against matching outside offers. Others, like Google, are more flexible and may respond aggressively to retain top talent, especially when the competing offer comes from a company perceived as a talent threat.
- **Raises typically come in equity**: When a raise is granted in response to a competing offer, the increase often comes in the form of additional stock (RSUs), rather than base salary.
- **This approach is a calculated risk**: Bringing a competing offer can trigger a raise, but it can also signal that an employee is willing to leave, which may affect internal perception. It should be done carefully and with genuine intent.

An Often Forgotten Part Of Tech Pay - Don’t Mess Up Your Taxes!

This video segment offers **critical tax advice for high-earning employees in big tech**, particularly in the U.S. It emphasizes the importance of understanding how taxes work with equity compensation to avoid severe financial consequences.

- **Set your withholding percentage close to your actual effective tax rate**, which for many tech workers is around 30%. This helps avoid massive surprise tax bills—sometimes exceeding $100K—during tax season.
- **RSUs (Restricted Stock Units) are taxed as income when they vest**, not when they’re sold. If the stock value drops after vesting, you’re still taxed at the higher initial value, creating a potential mismatch between tax owed and actual value retained.
- **Default withholding settings are often too low**, especially on platforms like E\*TRADE (commonly set at 22%). If not adjusted, this can lead to underpayment and steep penalties later.
- **If RSUs lose value and you’ve under-withheld**, you may be forced to sell more shares than expected just to cover your tax liability.
- **Some intentionally under-withhold to invest the difference**, but this is risky and should only be done with a clear financial strategy in mind.

Why You Should Start Your Career At A Big Tech Company

- **There's no universal right answer to which company works best for you** - At the end of the day, you should figure out what you care about and what your goals are and work backwards from there. It's entirely possible that Big Tech isn't a good fit for you.
- However, in a vacuum, you should start your career at a Big Tech company if you can. The main reason is that Big Tech is generally quite good at adding a layer of consistency to your career.
- You will probably learn a lot about writing good, scalable code as these companies know how to build massive systems and hire smart people.
- Your compensation will be very competitive, making it easier to negotiate proper pay and level at future jobs.
- You will probably develop a decent suite of fundamental soft skills as you need to learn how to work with many stakeholders to succeed at Big Tech.

Promotion Is Underrated And The True Foundation Of Your Pay And Career

Here are the core points from the video:

- In a lot of companies, promotion isn't meaningful, both in terms of growth and pay increase. *However, promotion is extremely powerful when you're working at a top-tier company like FAANG.*
- In a good environment, promotion is the most organic option to increase your total compensation as it means that your actual skill and increased pay are actually correlated with one another.
  - If you get promoted at a FAANG/Big Tech company, this sets the foundation for future opportunities as you will now be put at this level at least 95%+ of the time. For example, if you become a senior engineer \[L5\] at Google, it is very unlikely that your next company will put you below senior.
  - It's also crucial to remember that at FAANG/Big Tech, the expectations are quite real and quite high. By getting promoted to your level, this means that you are actually able to perform at this level, as opposed to the scenario where you negotiated an up-level via a job switch where you might be dangerously over-leveling yourself.
- *The problem with doing the interview prep and job switching grind is that you're not actually growing as a software engineer during that time.* There is a huge disconnect between interview skill and actual skill, especially with data structures & algorithms (DSA).

Additional promotion resources:

- [Nail Your Promotion: Senior To Staff (L5 -&gt; L6)](https://www.jointaro.com/learning-paths/nail-your-promotion-senior-to-staff-l5-to-l6/)
- [Nail Your Promotion: Mid-Level To Senior (L4 -&gt; L5)](https://www.jointaro.com/learning-paths/nail-your-promotion-mid-level-to-senior-l4-to-l5/)
- [Nail Your Promotion: Junior To Mid-Level (L3 -&gt; L4)](https://www.jointaro.com/learning-paths/nail-your-promotion-junior-to-mid-level-l3-to-l4/)

Job Switching Is Great For Pay But With Major Caveats

This video segment explores **job switching as a strategy to increase compensation**, acknowledging its significant financial benefits while outlining important limitations. It offers a balanced view of when and how to leverage this option effectively within a career in tech.

- **Job switching can deliver major pay increases**, especially when moving from lower-paying companies to top-tier tech firms like Facebook, Google, or Airbnb. Offers from these companies often represent a different compensation tier altogether.
- **The current tech market is highly competitive**, driven by remote work and talent shortages, which makes switching jobs particularly lucrative for engineers not already paid at “top of market” rates.
- **However, job switching comes with diminishing returns**. Frequent transitions (e.g., every 6–12 months) can raise red flags for recruiters due to high costs of hiring and onboarding, making a two-year tenure the informal minimum standard.
- **Banding limits how much pay can increase** through switching if already working at top-tier firms. For example, a mid-level engineer will only be offered a similarly banded role and compensation elsewhere.
- **Job switching doesn’t contribute to actual growth as an engineer**. Preparing for interviews (e.g., Leetcode) is time-consuming and doesn’t improve the long-term skills needed to succeed or progress to leadership roles like principal engineer.

The Incredibly Rare Benefit Top Tech Companies Offer - Equity Refreshers

This video segment explains **refresher equity grants**, a powerful and rare form of compensation offered mainly by top-tier tech companies like Facebook and Google. These grants serve as both a performance incentive and a retention strategy.

- **Refresher grants are annual RSU awards**, given in addition to the initial offer. Their size is determined by an employee's level and most recent performance review.
- **Compensation structure is formulaic** at big tech companies, including the calculation of refresher amounts, which often outpace inflation even in challenging economic climates.
- **Grants stack over time**, meaning employees may have multiple overlapping equity packages (original + yearly refreshers), significantly increasing total stock-based compensation over the years.
- **Year four marks a peak**, where compensation from the initial grant and up to three refreshers overlap—this is why many employees leave after their fourth year, as compensation often drops after the original grant fully vests.
- **Refresher grants are a major retention tool**, helping extend average tenure at top companies from around two years closer to four.

How To Navigate Your Stock Options

This section of the video explores **what to do with startup stock options**—both while employed and after leaving a company. It emphasizes evaluating offer quality upfront and making strategic decisions about exercising options based on company outlook and personal risk tolerance.

- **Understand the offer**: When joining a startup, it's important to know both the **strike price** (cost to buy shares) and the **fair market value (FMV)** of the shares. A significant gap between these numbers indicates more potential upside.
- **Don’t exercise too early**: While employed, it's typically better to wait before exercising options. Exercising early ties up personal capital and carries risk if the company performs poorly or fails before a liquidity event.
- **Exception for early-stage employees**: If the cost to exercise is very low (e.g., a few hundred dollars), it may make sense to do so early to start the **long-term capital gains clock** for better tax treatment.
- **After leaving the company**: Most startups require options to be exercised within **90 days of departure**. If there's confidence in the company’s future, it may be worth exercising all or part of the options—otherwise, it might be best to walk away.
- **Weigh risk vs. return**: Exercising options is a personal investment decision. If the company is struggling or unlikely to succeed, even favorable strike prices can result in total losses.

Understanding The $$$ Behind Stock Options - Hypothetical Startup Example

This video uses a hypothetical example from Carta to illustrate how startup stock options can lead to financial gain—or loss—depending on the company’s trajectory. It highlights both the upside potential of a successful IPO and the downside risk if the company underperforms.

- A fictional employee joins a startup, *Meatly*, in January 2020 and receives 16,000 stock options at a $1 strike price. After two years, 8,000 options (50%) have vested.
- When the company IPOs at $5/share, the employee exercises the options, spending $8,000 for shares now worth $40,000—a **$32,000 profit**.
- Alternatively, if the employee exercises at departure and the company later sells for only $0.75/share, the same $8,000 purchase yields **just $6,000 in value**, resulting in a **$2,000 loss**, not including taxes.
- This example underscores that **stock options carry real financial risk**, unlike RSUs, which are granted outright and do not require upfront payment.
- Employees need to carefully consider market performance and timing before exercising options to avoid losses.

Real Stock Options Example - Kosei (Acquired By Pinterest)

This final segment offers a real-world walkthrough of a startup stock option offer and breaks down the critical information employees need to assess the *true* value of such equity. It highlights how confusing option grants can be without proper context and the financial implications of exercising options.

- **Real Offer Letter Example:** The speaker received an offer of 62,000 options at a $0.14 strike price, totaling $8,750 to exercise. However, the true value of this offer depends entirely on factors not included in the letter, like company valuation and total shares outstanding.
- **Vesting and Exercising Mechanics:** Vesting followed the standard schedule—1-year cliff with monthly vesting afterward. Post-termination, many startups only give a 90-day window to exercise, which can be financially burdensome.
- **Liquidity and Risk Considerations:** Employees may lose out if they can't afford to exercise before leaving a startup. As a response, some companies began extending the exercise window up to 10 years, reducing financial pressure on departing employees.
- **Tax Strategy Tip:** Exercising early (if financially feasible) starts the clock on long-term capital gains, which can save 10–12% in taxes versus short-term treatment if exercised and sold after a liquidity event.
- **Most Common Mistake:** Employees often overvalue large share numbers without understanding what fraction of the company those shares represent. To assess an offer, it’s essential to ask:
  - *What percentage of the company do these shares represent?*

  - *What is the current fair market value versus the strike price?*

Without those answers, it's impossible to accurately evaluate the worth of a stock option grant.

The Most Misunderstood Part Of Tech Pay - Stock Options

This segment unpacks **stock options**, a type of equity compensation typically offered by startups rather than large public tech companies. It contrasts stock options with RSUs and explains how options function, including taxation and risk.

- **What Stock Options Are:** A stock option gives the right to purchase company shares at a predetermined price (the “strike price”). These are common in startups but rare in large public companies like Google or Facebook.
- **Grant and Vesting Mechanics:** Similar to RSUs, options usually vest over four years with a one-year cliff. The total grant allows employees to buy a fixed number of shares—often a large number—at a low strike price.
- **Value and Risk:** The value of stock options depends on the company’s success. While paper valuations can be high, employees must actually buy the shares (unlike RSUs, which are granted). If the company never goes public, the options might end up worthless.
- **Types of Stock Options:**
  - **ISOs (Incentive Stock Options):** Taxed only upon sale, usually favorable for employees.

  - **NSOs (Non-qualified Stock Options):** Taxed at the time of exercising and again at sale, even if the shares haven't yet generated real money—making them riskier.
- **Tax Implications:** With NSOs, employees may owe taxes just for exercising the option (based on fair market value), creating potential financial burden even before any profit is realized.

This complexity and risk/reward profile is a key difference from the more predictable RSU structure in big tech compensation packages.

How Base Salary Becomes Insignificant - Tech Compensation Archetypes

**Equity** is the primary reason that tech compensation is so high. Equity means your employer gives you ownership in the company as a portion of your compensation. The idea is that this incentivizes you to work harder to have the company perform well.

For most of Senior+ roles in US-based companies, equity will begin to dominate your pay. (This is the hallmark of a top tech company.) Some examples:

- **For mid-level roles**, the equity in a company could be something like $20K - $100K / year. Senior engineers at top companies start to make almost an equal amount in stock as they do in base salary (cash comp).
- **For very senior roles**, the majority of the total compensation comes from equity. e.g. at the Director level, the ratio is around 2:1, so their base salary may be $270K/year, and their equity could be $500K/year.
- Compare this to a non-tech, old-school company like General Motors. The average pay for a Director of Engineering is $280K, which is great, but you could easily make that amount much earlier in your career within Big Tech. The reason for this gap is because General Motors is a lot more stingy when it comes to giving out stock to their employees.

Understanding ESPP - 85k Salary Example

This segment breaks down a numerical example of how **Employee Stock Purchase Plans (ESPPs)** work in practice. While ESPPs may offer modest financial gains, they remain a valuable benefit—especially at companies that don't provide RSUs.

- **Basic Example:** With an $85,000 base salary, contributing the maximum 10% ($8,500) into an ESPP with a 15% discount allows purchase of 100 shares at $85/share when market price is $100/share—equating to $10,000 worth of stock.
- **Annual Gain:** This results in an immediate $1,500 gain, illustrating the perk's effective “free money” nature through discounted stock purchasing.
- **Complex Structure:** Though ESPPs involve layers such as salary withholding, fund accumulation, and exercise schedules, the benefit is relatively straightforward once broken down.
- **Limited Upside:** Because ESPPs are tied to salary and offer a modest discount, the overall financial impact is smaller than RSUs—yet still meaningful.
- **Prevalence at Non-Big Tech Companies:** Many companies, particularly outside top-tier tech, offer ESPPs instead of RSUs. For example, PayPal provided only ESPP (no RSUs) to new grads eight years ago.

ESPP Explainer With Tips On How To Navigate It

This section explains the **Employee Stock Purchase Plan (ESPP)**, a more traditional and common form of stock-based compensation compared to RSUs. ESPPs are typically found at companies outside the top-tier tech firms and offer employees a way to invest in their employer's stock at a discount.

- **What ESPP Is:** ESPP allows employees to purchase company stock at a discounted rate—usually 10% to 15% off the market price—using a portion of their base salary.
- **How It Works:** Employees allocate up to 10% of their salary into a fund, which is periodically used to buy company shares. Unlike RSUs, employees pay to acquire the shares.
- **Tax Implications:** The discount is considered taxable income because it's effectively a financial gain (e.g., buying $100 stock for $85 means $15 in taxable benefit).
- **Differences from RSUs:** RSUs grant a fixed number of shares, regardless of stock price fluctuations, while ESPP is tied to monetary investment and stock price dynamics, often using an average price over time.
- **General Advice:** Though the gains may be smaller and the system slightly more complex, ESPP is considered “free money” and is worth maximizing when financially feasible.

How RSUs Can Both Greatly Reward And Punish You - Pinterest Example

This segment explains the volatile nature of equity compensation through the real-life example of Pinterest. It demonstrates how RSUs (Restricted Stock Units) can dramatically boost or reduce total compensation based on stock market performance, and highlights the importance of timing, risk awareness, and planning when joining a company.

- **Pinterest’s RSU Grant Example:** An employee joining Pinterest in January 2020 with a 20,000 RSU grant at a $20 stock price would have received a $400K equity package. As the stock price rose to $80 in a year, the total value of those RSUs skyrocketed to $1.6M.
- **Golden Handcuffs Phenomenon:** When stock prices soar, employees become financially incentivized to stay—even if they’re unhappy—due to the high value of unvested RSUs, often referred to as "golden handcuffs."
- **Stock Price Timing Matters:** The RSU grant is priced just before the start date. If the stock price dips right before joining and then recovers, the employee benefits from an immediate bump in total compensation.
- **Market Downturn Impact:** As Pinterest’s stock fell \~70% from its peak in 2021, employees who joined during or after the peak saw a significant drop in total compensation—sometimes down to one-third of their original grant value.
- **RSU Lockout Periods:** Employees at public companies can't sell RSUs at will. Sale windows are restricted to prevent insider trading, which can prevent selling even when the stock is at a peak.

Related resources:

- ["If my main goal is compensation, would it be wise to learn blockchain tech since it will potentially be the tech of the next couple decades?"](https://www.jointaro.com/question/tyS6MzzADqBzt10802Mh/if-my-main-goal-is-compensation-would-it-be-wise-to-learn-blockchain-tech-since-it-will-potentially-be-the-tech-of-the-next-couple-decades/)
- ["How do people in Big Tech deal with constantly fluctuating Stock Prices from their company?"](https://www.jointaro.com/question/JhEDkJl8AexlsL4IXBOH/how-do-people-in-big-tech-deal-with-constantly-fluctuating-stock-prices-from-their-company/)
- [\[Taro Top 10\] Pay Negotiation](https://www.jointaro.com/playlist/uyWSc5q79zFw2Ei7w59d/)

Tips On Navigating RSUs

This video highlights the complexity of **RSUs (Restricted Stock Units)** in tech compensation, emphasizing how RSUs introduce elements of personal investing into salary evaluation. Understanding how stock fluctuations affect total pay and managing risk becomes crucial.

- **Evaluating RSUs is similar to investing**, since compensation becomes tied to the company's stock performance. Joining when stock prices are low can lead to significantly higher gains if the stock appreciates.
- **Choosing a company means essentially “buying” into its future**, since RSUs form a large part of total compensation. A rising stock price increases income; a falling one diminishes it.
- **There is no universal rule for managing RSUs**, as financial goals and risk tolerance vary by individual. Compensation strategies should reflect personal financial context.
- **Some employees choose to sell RSUs immediately upon vesting**, aiming to diversify rather than concentrate risk. This reduces financial dependency on a single company’s performance.
- **Investing RSU proceeds into diversified assets like S&P 500 index funds** is a common approach for those seeking more stability and reduced exposure to employer stock.

Why Big Tech Compensation Is So High - RSUs

This video explains how **Restricted Stock Units (RSUs)** work as a major part of tech compensation, especially in large tech companies. It outlines key timing mechanisms, industry trends, and the outsized impact RSUs can have on total earnings.

- **RSUs are company shares granted over time**, typically as part of a four-year compensation package. For example, an employee may be awarded 4,000 shares and receive 1,000 per year.
- **Most companies enforce a one-year cliff**, meaning no shares are received until completing the first full year. However, some companies like Google and Facebook have moved toward shorter cliffs, such as three months.
- **After the cliff, vesting usually occurs quarterly or monthly**, gradually releasing shares to the employee. This incentivizes ongoing retention.
- **Graphics help illustrate vesting schedules**, showing an initial cliff followed by incremental monthly or quarterly share distributions over the remaining years.
- **RSUs can far exceed base salary in total value**, especially at the senior level. In some cases, RSUs make up 75% or more of an individual's total compensation in big tech.

Performance Bonus Explainer With Meta Senior Software Engineer [E5] Example

This video breaks down how **performance bonuses** work in the tech industry, focusing on their structure, key variables, and real-world examples—especially from companies like Facebook. It underscores how these bonuses are a significant portion of total compensation and are both performance- and timing-sensitive.

- **Performance bonuses are calculated using a base percentage** tied to level and salary, and then adjusted by two multipliers: individual performance and company performance.
- **Company performance multipliers vary**, often based on metrics like revenue or stock performance. For example, Facebook’s company multiplier was 90% in late 2017, despite its historically strong track record.
- **Individual performance multipliers** reflect how well someone met expectations (e.g., "meets all" equates to 100%), and strongly influence the final bonus amount.
- **Bonuses are only paid if still employed at payout time**, meaning even working a full half-year won't earn a payout if the person leaves before the bonus distribution date.
- **Payout examples help contextualize the numbers**: a senior engineer at Facebook with $62K eligible earnings, a 15% target bonus, and multipliers of 1.0 (personal) and 0.9 (company) would receive about $8,300—paid out roughly two months after the performance period ends.

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