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Don't confuse the dollar amount of your salary with your total compensation. Salary is only one term in the overall equation. Consider, for example, a company
by Sukotto 17y ago
Don't confuse the dollar amount of your salary with your total compensation. Salary is only one term in the overall equation.
Consider, for example, a company that buys you lunch. Here in NY, lunch costs about $10 if you buy it yourself. If you're in the 25% tax bracket, that's worth $3,300+ in salary.
Do they provide daycare? Transportation costs? Paying for conferences? 401k matching?
Your friends that feel underpaid did a poor job of negotiating their total compensation. Next time they should sit down and do something along the following lines:
- list out every possible benefit a company might offer
- group the ones they personally care about (don't have kids? Then the daycare benefit is worthless)
- for the ones they care about, think about how much each one is worth in $ to them.
- think about what the minimum they would accept for that benefit, how much would make them happy, and how much would make the ecstatic.
- for the ones they don't care about, thik about how much it costs the company to pay for each
When it comes time to negotiate your compensation, always think in sets. Always word things in terms of how moving any one piece requires movement on a different piece. Give up the things in the "don't care" set for the equivalent value of something in the "want" set.
If they want to give you less money, you say you could agree to that, if they give you X number of vacation days. Or if they say they have free daycare, you say that you appreciate that, but since you don't have kids you would rather have "work at home Fridays" and a slightly larger 401k match.
Consider the total You are much more likely to get a larger total if you don't focus only on the money.
[edit: bad math]
(salary equivalent) = (daily cost * 5 days/wk * 50 wks/yr)
------------------------------------
( 1 - tax rate )
25% tax bracket
$ 5 lunch = (5 * 5 * 50)/(75%) = $1,667 salary
$10 lunch = $3,333
So if the company gives you lunch each day, it's worth $333 in salary for every dollar you would have to spend to buy the same lunch. That ignores the fact that your income tax rate changes depending on your salary.
- olegk 17y agoHow the hell a $10 lunch is worth $10,000? Even if you work every single week (no vacation), 5 days a week, 52 * 5 * $10 = $2600. Plus, you don't have to spend $10 for lunch. There's a bunch of places in NYC where you can eat a decent lunch for $5-8.
- Sukotto 17y agoCorrected, thanks. Yes, prices vary wildly from area to area. My point is that you should try and figure out, given each possible benefit, the range of how much it's worth to you. Be aware of what things you want, what each is worth at various levels, and what you're willing to give up to get those things.
- grourk 17y agoYou seem to forget that tax brackets are marginal.
- Sukotto 17y agoNo I didn't. But honestly, how many people really need to worry about it? For this kind of analysis just pick an effective tax rate and work out the numbers. Figure out what mix of money + other benefits is going to make you happy and try to get as close to it as you can.
- dnsworks 17y agoYou also need to understand what these so-called "benefits" cost you. Sure to work at Google means I can take one of their shuttles, but it also means I would have to live a lifestyle I dread: being someone who lives in a great city and commutes to a soulless suburb. My favorite was always the companies who try to convince you to work later by offering you some half-assed dinner. I worked at a "Netscape startup" (because in the valley we like to brag what failed company our founders come from), and every night for 6 months they ordered some awful thai food for dinner, in order to try and convince everybody to put in an extra 2 hours. And then you need to ask existing employees if the benefits are real. I had lunch with three of my friends in Google's SRE when GOOG was trying to convince me to work with them. Their response on the benefits: - Daycare: bullshit, 1-2 year waiting list - Shuttle: Only if you don't mind working a crazy schedule and being at the whim of the shuttle schedule - 20% time: too over-worked to take advantage of it - Google tech talks: So what, they're free on Google Video Valuating an offer is a complicated process. That's where "Show me the money" or "fuck you, pay me" is an effective mentality when a future employer is trying to con you into taking less than market rate. It's a sale, you convince them why you're worth the number you write on the piece of paper, or they convince you why you're not. Do you want to work for an employee who thinks your work is worth less than you believe it's value to be?
- Sukotto 17y agoBy the time you get to this part of the hiring, you should have already decided if you want to work for the company. What you're doing here is working out what it's going to cost them to have you. Good point about "real" benefits. You should certainly do some research to learn how good they really are. The company "workout room" might be a well appointed sports club, or it might be a basement closet with only a worn out old treadmill.