A signing bonus of 100% of salary isn’t uncommon in the tech industry. While this sounds amazing, it’s often nothing more then replacement for the otherwise lost income from unvested equity.

Understand your total compensation which is a combination of salary, cash bonus, and equity. For example, imagine making a steady state total compensation of 200$/ year*. For this example, imagine this breakdown:

  • Base salary: 150$/year, paid out bi-weekly.
  • Cash Bonus: 25$/year, paid out annually.
  • Equity Grant: 25$/year, paid out annually vesting over 5 years.
  • Equity at 5th year: 25$ paid out annually.
  • Equity at 1st year: 5$ paid out first year.

Imagine you switch companies right after the cash and equity has been rewarded, and negotiate a total compensation of 200$/year, with the same salary/cash/stock ratio.

The first year your comp will only be your salary - 150$. This means you’re losing 50$ on the first year. E.g.

  • Base salary: 150$/year, paid out bi-weekly.

The second year, you’ll get salary, cash bonus, and some equity, BUT your equity hasn’t fully vested, so you’ll only make salary and bonus of 180, meaning you still lose 20$ in the second year.

  • Base salary: 150$/year, paid out bi-weekly.
  • Cash Bonus: 25$/year, paid out annually.
  • Equity Grant: 5$ paid out annually.

Continuing the math, you’ll actually need a signing bonus of 100$ to just cover your lost income from the previous years. Lost income:

  • Cash Bonus Year 1: 25$
  • Equity Year 1: 25$
  • Equity Year 2: 20$
  • Equity Year 3: 15$
  • Equity Year 4: 10$

Suddenly your 100% of salary signing bonus of 100$ doesn’t seem nearly as awesome.

A few notes:

Bonus and equity often vary based on performance. This article assumes you always perform to the same target performance.

Equity based compensation is a function of stock price, and this article assumes a stable stock market price. This can be a bad assumption, for example, Amazon increased 375% and Microsoft increased 200% over the 4 years from June 2014 to June 2018.

Compensation is often a function of “job level” which varies by company. This site translates ladder levels between the big tech companies nicely (but not the compensation levels).