Evaluating Compensation in a Job Offer

The job market is hot, especially in the past year in tech. When thinking of our careers, many of us as tech workers are faced with significant “Fear of Missing Out” (FOMO) or burnout. We’re also affected by a (mostly correct) media narrative that companies are uncaring about individuals. That leads many to look for greener pastures. Here, I’ll share a perspective on how to evaluate compensation in an offer holistically.

Do Your Research

FOMO is real. Sites like Monster, Glassdoor, Zip Recruiter, etc. have a vested interest in driving employee churn and turnover. They also provide a valuable resource to research what it’s really like at companies and what a fair market salary looks like. At Atomic, we purchase data sets yearly to re-evaluate compensation for our employees for each market we operate in. We’ve found data from PayScale to be the most reliable and accurate over the past decade.

Keep in mind the following variables will impact what fair market salary looks like for most people:

  • Job title
  • Years of experience
  • Geography
  • For devs, technical stack
  • Company size
  • Undesirable aspects (Things like high stress, lots of travel, a highly bureaucratic organization, should drive pay.)
  • A requirement for specialized, niche knowledge

That isn’t an exhaustive list. However, these factors are good to keep in mind when comparing competing offers or thinking about what fair pay is. You can’t compare all jobs in an apples-to-apples way. Fair pay at a mom-and-pop IT job in Idaho is going to look a lot different than fair pay at Apple in Cupertino.

Salary and Work Expectations

Ask people you meet in the interview process how many hours people put in each week. If one offer is for 10% more pay than another, but the company culture dictates that people work 50+ hours vs. 40 hours a week, that might not be a good trade-off. While you’re at it, ask about pressure, stress, and deadlines. Don’t take management’s word for it. It’s a bad sign if you find a big discrepancy between what you hear from people in the job and their leaders.

Bonus and Profit Sharing

Atomic practices quarterly cash profit sharing — we share 25% of our company profits broadly, with everyone in the company. Our process is transparent and part of our normal quarterly operations. I’ve also worked at companies where there are “sometimes” bonuses at the end of the year. There seemed to be no certainty or reasoning behind how/why/how much they gave out. When receiving an offer that mentions bonus or cash profit sharing, ask questions:

  • How reliable is this?
  • Who gets the bonus?
  • How is the bonus amount determined?

Put a premium on reliable bonuses that have a well-understood process behind them.

Vacation Time and Flexibility

Most tech jobs offer paid vacation time. In addition to how many weeks of vacation one receives, also ask:

  • What holidays are offered as paid time off?
  • If vacation time is “unlimited” in practice, is it actually okay to take time off?
  • What does vacation approval look like? Are there project-related restrictions on when vacation is allowed?

There’s also the question of flexibility. How much freedom would you have to set your own schedule? Is it possible to take unpaid time off or shift to a temporary, part-time work schedule to extend time off? These options can be wonderful in practice, but not every job offers them.

Retirement Plan

This is a favorite of mine. Often overlooked is the presence and quality of a retirement plan. Employer matching is free money — the more of it the better. Beyond the matching amount, you can also ask who administers the 401k and what type of funds are offered.

High-quality 401k plans tend to have strong employer matches and offer index funds with low fees. 401k plan fees are notoriously opaque, but low fees are especially important as your balance increases over time. A plan filled with funds that have 1-2% expense ratios is bad. Those ratios can work out to a drag of thousands, or tens of thousands, of dollars every year, just because the company chose a bad fund. That’s not good.

Health (and Other) Insurance

This is a huge topic. My advice here is to understand what is offered and what health insurance costs in premiums. Does the company pay the full premium?

A powerful option, especially for young and relatively healthy people, is leveraging a Health Savings Account. These accounts are offered as part of a qualifying high-deductible health plan. HSAs can be great savings vehicles because money can be contributed tax-free. The money can also grow and be withdrawn tax-free for qualified expenses. Most can’t find a tax shelter like this in any other account, and nearly all of us will eventually have medical costs.

Other benefits offered may include short- and long-term disability, dental, vision, and life insurance. Be careful with life insurance. There is a risk that a person becomes terminally ill, is unable to work and must quit, loses their life insurance (provided through the job), and is now uninsurable. I recommend my friends and family consider buying term life insurance separate from their employer.

Indirect Compensation, Fringe Benefits, RSUs, Options, etc.

Consider these other perks and forms of direct compensation. At an old job, I was able to participate in a stock-purchase program where I could buy shares at a reduced price and sell them immediately at a profit. Many companies offer RSUs and options as part of the total compensation package. Do your research with unbiased sources to understand the complexities around these forms of compensation.

Some fringe benefits that also may impact your evaluation of an offer to also consider are:

  • Nice office and/or remote work options
  • Professional development/conference attendance
  • Social events
  • Parking
  • Computer hardware
  • Funeral leave
  • Paid time off
  • Company ownership opportunities

Adding Everything Up

I encourage people to add up all the direct and indirect compensation when comparing offers. What’s the net value of the whole package? Money is fungible; don’t just focus on one aspect.