Understanding Salary Structures: Base, Bonus, Equity, and Benefits

## The Four Pillars of Compensation

Modern tech compensation consists of four main components, each with different characteristics:

| Component | Certainty | Frequency | Taxed When |
|-----------|-----------|-----------|------------|
| Base salary | Guaranteed | Bi-weekly/monthly | Each paycheck |
| Cash bonus | Variable | Annual | At payment |
| Equity | Variable | Vesting dates | At vest/exercise |
| Benefits | In-kind | Ongoing | Various |

## Base Salary

The foundation of your compensation. Key characteristics:

- **Guaranteed**: You receive this regardless of company performance.
- **Benchmark**: Other components are often calculated as a percentage of base.
- **Sticky**: Hard to reduce once set (except via layoff/restructuring).
- **Compounding**: Raises are applied to this number.

### How Companies Set Base Salary

1. **Pay bands**: Each level has a range (e.g., L5: $160-210K).
2. **Location adjustment**: Different bands for different markets.
3. **Experience within band**: Where you fall depends on experience and negotiation.
4. **Compression**: Companies periodically adjust to prevent pay gaps.

## Cash Bonus

### Types

| Type | Typical Range | Based On |
|------|--------------|----------|
| Target bonus | 10-25% of base | Individual + company performance |
| Spot bonus | $1,000-$10,000 | One-time achievement |
| Signing bonus | $10,000-$100,000 | One-time, to close the deal |
| Retention bonus | 10-50% of base | Staying through a period |

### Important: Target vs Actual

A 15% target bonus doesn't mean you'll receive 15%. The payout depends on:
- Company performance multiplier (0.5x to 1.5x).
- Individual performance rating.
- Actual payout range: 0-200% of target.

## Equity Compensation

### RSUs at Public Companies

| Year | Shares Vesting | Value at $150/share |
|------|---------------|---------------------|
| Year 1 (cliff) | 250 | $37,500 |
| Year 2 | 250 | $37,500 |
| Year 3 | 250 | $37,500 |
| Year 4 | 250 | $37,500 |

**Refresher grants**: Annual equity grants to keep total compensation competitive.

### Stock Options at Startups

Options are a bet on future value. The value depends on:
- **Exercise price** vs. current fair market value.
- **Company's future valuation**.
- **Dilution** from future funding rounds.
- **Exit probability** (IPO or acquisition).

Rule of thumb: Discount startup options by 80-95% for risk.

## Benefits

Benefits are non-cash compensation with significant value:

### High-Value Benefits

- Health insurance (employer portion): $15,000-$25,000/year.
- Retirement match: Up to $23,500/year.
- ESPP discount: 15% guaranteed return every 6 months.

### Medium-Value Benefits

- Additional PTO beyond standard.
- Parental leave (above statutory minimum).
- Education/training budget.

### Low-Value but Appreciated

- Free meals, snacks.
- Gym memberships.
- Commuter benefits.

## The Total Compensation Stack

| Level | Base | Bonus | Equity | Benefits | Total |
|-------|------|-------|--------|----------|-------|
| Junior (L3) | $110K | $11K | $10K | $30K | $161K |
| Senior (L5) | $180K | $27K | $60K | $35K | $302K |
| Staff (L6) | $220K | $44K | $150K | $40K | $454K |

## Key Takeaways

1. Base salary is guaranteed and compounds — negotiate it carefully.
2. Bonus targets are not guarantees — factor in the payout range.
3. Equity becomes the largest component at senior levels.
4. Benefits can add $30-50K to your total compensation.
5. Always evaluate the full stack, not just one component.