How Six Figure Tech Salaries Really Work | MANGA - YouTube

hey everyone welcome back to my channel i'm  bicola and today we are talking about that  

sweet tech compensation this is a video you guys  requested and i'm here to deliver so before we get  

started i do want to share a story about how not  understanding tech compensation screwed me over  

when i got my first offer as a software  developer it was a big deal for me  

because i went from a 50 000 salary to doubling  that in yet less than a year but you know what  

i'd read a lot of articles online and i  knew better than to accept the first offer  

so even though i was absolutely scared i decided  to negotiate and i was able to negotiate like  

a five six thousand dollar bump in salary and  that was the only number i cared about was the  

base salary then over a year later my company got  acquired and that's when i decided to look at my  

compensation package and i realized that there was  a piece of the compensation package that i never  

even read about which was equity i didn't even  look at anything past the base salary but when my  

company got acquired that little sentence became  a huge piece of my compensation going further  

i realized that if i'd actually taken the time  to sit down and understand tech compensation  

i literally could have changed my life  and i probably wouldn't have had to work  

so in this video we're going to be talking about  tech compensation but i wanted to start off by  

letting you guys know please read every piece  of your tech compensation package and don't be  

like me making this video for me five years ago  because i didn't have a lot of people talking  

about tech compensation i didn't know anything  about how it worked and this video should provide  

a comprehensive view of everything you need to  know about tech compensation not only like your  

salary your bonus but also about equity from rsu's  to talking about options and how to value your  

options at a startup and i hope you enjoy so tech  compensation is broken into usually four pieces  

the first piece of your technical compensation is  your base salary this is like a salary at a lot  

of other companies it's a yearly salary based on  about 40 hours a week even though you might work  

more or less than that and you're paid the salary  usually on a bi-weekly basis so we all know what  

salary is so let's hop on to the next piece which  is your bonus so there are three types of bonuses  

i've seen in different compensation packages  i've seen like an annual bonus so an annual bonus  

is a bonus you're given annually based on your  performance for that year it's usually written  

down in your tech compensation depending on the  size of the tech company that you're working for  

at bigger companies they tend to give you about  10 to 20 percent of your base salary as your  

target annual bonus but of course this is a target  annual bonus so you could receive more than this  

or you could receive less than this your annual  bonus is basically based on your performance  

as you get more senior and senior at a tech  company this can be an even larger piece  

of your compensation the second piece of bonus  i've seen at tech companies is something called  

a sign-on bonus so for signing an offer the tech  company might agree to give you a certain amount  

of money that's paid within your first two pay  cycles and that's called your sign on bonus but  

you want to make sure to read the fine print  because for certain companies there might be a  

clause that says if you leave the company within a  year or within two years you have to pay back that  

sign-on bonus so it's really important to read the  fine print and understand if there are any clauses  

to taking your sign-on bonus so for our sign-on  bonuses i've seen new grads get signed on bonus  

as an experience people get signed on bonuses so  your sign-on bonus can be negotiated based on a  

couple things if you have competing offers and the  company wants to be a more attractive offer they  

might increase their compensation by increasing  your sign-on bonus if you're leaving behind like  

a yearly bonus or annual bonus by joining a new  company the company might agree to give you that  

equivalent amount in your sign-on bonus so it's  going to depend on how you negotiate and that's  

going to really influence what your bonus looks  like make sure to check out my video that i made  

about negotiating your compensation so the third  piece of bonus that i've seen at tech companies is  

something called a relocation bonus so if you're  moving across state lines or you're even moving  

in that same state the company might give you a  small bonus to help you with the moving process  

so that's something to see if you can negotiate  and ask for if you're going to be joining a  

company that's in a different state or very far  away from where you currently live and this is  

something i've typically seen more for larger tech  companies as well so another piece of compensation  

that no one really talks about is definitely not  the sexiest part of your compensation or your  

benefits i feel like benefits can be equivalent to  an additional 500 to a thousand dollars a month so  

i would again improve the fine print and i'd look  to see is your company giving you free health care  

are they doing a 401k match are they doing an  hsa contribution do they have perks like a free  

gym like at my old company i have free equinox  and that was equivalent to an additional 250  

a month because i go to the gym pretty frequently  and that was a perk i was definitely gonna use  

other perks i've seen are things like free food  free transportation so all these different things  

you should consider when you're looking at your  tech compensation and when you're comparing two  

different offers considering your benefits can  really help you understand how much each offer  

is really valued at finally the fourth piece of  this compensation pie that i've seen is equity  

so equity for me is like probably one of the most  interesting pieces of your technical compensation  

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based lessons go to ck dot chat piccola to get  started so what is equity you can see equity as  

just an ownership stake in a company for a public  company this is directly tied to their stock price  

but at a private company this equity is seen as  sort of like paper money and the real value is  

really seen when the company goes through either  an ipo or gets acquired that's when you actually  

get the monetary value of this equity but you can  still calculate what it could be and we'll talk  

about that later the whole idea of equity is that  it's supposed to align the businesses interest  

with the employee's interest when you think about  it ideally employees should want to work harder  

to increase the stock price because that just  increases the amount of compensation they get so  

it sort of as a way to sort of align the business  interests with the employees interest so kind of  

understand equity a little bit more i think you  have we have to see it in two different ways we  

have to see private company equity and your  public company equity let's start first with  

your public company equity when we're talking  about public companies we're talking about big  

tech companies like your google your facebook any  company that's on the stock market the type of  

equity these companies usually give is something  called an rsu an rsu is a restricted stock unit  

it's stock of a company that's not fully  transferable until certain conditions are  

met and those certain conditions are usually just  that the equity has vested or a time period has  

been passed and it's just basically a roundabout  way of companies avoiding taxes that's why they  

don't give you the equity directly because then  you'd have to pay taxes on it right away at these  

big companies in their offer letters you'll  see something like this forty thousand dollars  

worth of facebook rsu's over four year investing  period with a one year cliff i do want to say that  

that 40 000 gets transferred to the equivalent  units of facebook shares and then those units  

of facebook shares are what you actually get and  that's what's released every single quarter or  

every single investing period let's talk about  the terms vesting in cliff so i like to see  

cliff as kind of like golden handcuffs a cliff  is basically a clause that says your equity won't  

be released to you until x period of time so some  companies might have one-year cliffs where you're  

not going to get any equity until one year at the  one-year mark you might get a year worth of equity  

so one-fourth of your equity might be given to you  and then every fasting period which is the period  

of time they're going to continue to release  the remaining shares to you for some company  

it's quarterly or monthly so every investing  schedule you might just get x amount of shares  

every month or every quarter and something to  note too with like your investing schedule is  

taxes i know we've kind of talked about a lot of  things but like i mentioned earlier in this video  

at the period of time at fpdfs you immediately pay  income tax on that equity after you pay income tax  

on that equity you could pay a secondary tax so  if your shares increase in value and then you  

sell them less than a year you'll pay short-term  capital gains tax on that equity if you wait over  

a year and there's been an increase in the value  of those shares you'll pay long-term capital gains  

which is less than short-term capital gains  and once your equity is vested to you then  

usually you'll see it in whatever brokerage  account that the company uses that equity  

those shares like 10 units are released to you  and then you can decide if you want to sell them  

in the public market or on the stock market  if you want to sell those stocks to get cash  

equity at these companies at public companies  is definitely a big deal like for example if  

you think about tesla employees who a lot of  them became millionaires during the pandemic  

when tesla's stock was really pumped up a google  employee who was a chef after the company ipo'd  

his shares were worth over 40 million dollars so  equity is a huge piece of the puzzle especially at  

public companies now let's talk about how equity  works at private companies so a private company  

is a company that's not on the stock market and  it's usually called like a startup and it can be a  

company that's usually series a or series e round  of funding so this is where things can get really  

tricky and kind of exciting and at startups you  can kind of see your equity as a lottery ticket  

if your company appeals or gets acquired you  could find yourself a millionaire overnight  

or your equity could be worth zero because most  startups actually fail so with your startup equity  

it's really important to understand that most  startups fail so this type of equity is like a  

lottery ticket and is a little bit more risky than  a public company so startups have rsus which i've  

kind of explained before the only difference  is that you can't sell them at point investing  

easily you might have to find a roundabout way to  sell them a very common way startups give equity  

is something called options so a stock option is  the option to buy a share at a discounted price  

known as the strike price for example a startup  might give you 10 000 options over four years when  

those options best like if they confess just  like rsu's quarterly or monthly then you have  

the choice to exercise those options and what it  means to exercise an option that means that you're  

just buying the option at the strike price and  you're hoping that when the company has an exit  

through an ipo or getting acquired the share value  of that stock is more than you paid for when you  

exercise those options so you're hoping to make  money off that spread there are a lot of reasons  

why someone might choose to exercise their options  before the company gets acquired and it might be  

for like tax purposes you want to pay long-term  capital gains you don't want to pay short-term  

capital gains there are tax benefits of exercising  your options but you're also taking a risk because  

there is a chance that at exit or maybe at failure  the company isn't actually valued more than the  

strike price so then how do you value your equity  at a company so you want to follow this equation  

you want to look at the current valuation of the  company and the number of shares outstanding and  

this kind of shows you the current worth of your  options another thing you want to watch out for  

too when you're valuing your options is the  dilution so in future funding rounds you want  

to make sure the company isn't issuing new shares  so that the shares are worth significantly less  

so dilution is something you definitely want  to check out when you're valuing your options  

so there you have it a whole comprehensive  guide about how to value your startup equity  

understanding more about public company equities  and all the pieces that go into your compensation  

if you found this video helpful make sure  to tap that subscribe button and hit that  

like button to show this channel some love and  some support also make sure to check out all the  

resources below because i used a lot of resources  to understand more about equity and to understand  

more about tech compensation i hope you found  this video helpful and i'll see you guys next time

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