Ask HN: What's an appropriate compensation counter offer in London 2024?
I’ve agreed goals with my employer which if I meet by the end of Q4, I’ll be promoted into a new position. They’ve set a compensation suggestion for this role, but basically suggested that it was open to negotiation. They said they got the number by quickly googling Glassdoor and were a bit surprised it was so low elsewhere. Here’s some more background (trying to keep vague for privacy) before getting into detail:
- B2B SaaS utility & renewable energy startup, nearly 4 years old. - £3-£5m ARR range, almost profitable. Top 5% fastest growing UK. - Between 20-50 employees. Multiple cofounders. Dev team <10. - Many friends and family investors, one large seed, founders still hold >75% of equity. - Poor competition in sector, but those who are ok have some seed funding too. Lots of future revenue streams, high potential for growth. Target is £10m ARR in 2 years. Founders will look for exits sooner rather than later. Company highly acquirable by some FTSE100. - London
Context: - Joined 4yo as a junior full stack. £40k comp, 0.2% equity. Offered role as good friends with founders. 1st employee. No other benefits of note. 21 annual leave days per year. - Now senior at £75k same equity. Deep domain/ sector knowledge from prior experiences, but also from writing most of the code. Established most processes and infrastructure. Even for a new senior experienced dev, catching up with the infra and sector knowledge would take 1-2 years minimum.
Offer: - Head of backend/ data to free up cofounder to be more strategic. Manage team of 3. Responsible for pipelines uptime, data quality, future R&D & design research elements when it comes to new datasets to get. We are a data led company so this is critical. - £85k no extra equity.
Other: - I have £25k of income from other sources per year, so will be pushing over the £100k mark which here in the UK is a trap which means you pay 62% tax rate on every £ over 100k until £125k where it drops back to 47% for every £ over. - I am contributing heavily to pension, but maxed out employer contributions. >30yo (edit: fixed typo), have mortgage in LCOL area (Manchester), no kids but one on the way and married.
Two questions: - What salary feels right to ask for? The stack is in my favour and may never well be so strong for me again. I don’t want to burn bridges as they are friends, but also don’t want to be taken advantage of. There will 100% be a counter offer to consider for. I have an amazing set up with this company, but can afford (financially) to walk away if needed but again don’t want to burn bridges. I also have other ideas to work on in similar sectors if needed. - Equity is handled via EMI. Should I be pushing for more? 0.2% feels low, but have seen advice here suggesting not to take equity. Should I ask for a lower salary to avoid tax brackets but more equity in return? There is no vesting schedule, so only realised on sale & if you leave its at the companies discretion about if you keep your share.
This is quite a US heavy forum, so would extra appreciate other UK perspectives, but any advice is welcome.
124 comments
[ 5.0 ms ] story [ 183 ms ] threadFor what it’s worth it doesn’t mean you have to stop the Side stuff it’s just a good negotiating point
the only important thing, from their perspective, is how much replacing you will cost them, and from your perspective it's symmetric: what can you get elsewhere (by replacing your employer)?
So if you think you can definitely get better offers (even if you don't have one now), that will influence your negotiating position to go for a higher offer.
They refused, and I resigned immediately. I found a much better role, on more money, with better career opportunities quite quickly. My BATNA meant I could ask for the raise with some confidence. Of course you have to be willing to follow through; I wasn't bluffing.
Probably easier to be as aggressive as you were if there has been a significant negative change in the company vs a positive friendly environment which I have.
The goal is to have an active comparison, “if they just said no to everything here is what I would do and what that is worth to me.” And, you want to know the other party's best alternative, too, because you want to be able to say “I know we can do better than outcomes A and B.”
Negotiations “want” to be zero-sum and you have to constantly prop them up. There's actually strange parallels to this in theology and political science, complex multidimensional things getting collapsed to Left vs Right or God vs Satan and so forth. So we want to focus on one number, the salary, and party X wants it higher but Y wants it lower, now you have a zero sum game.
But the point of negotiation is the multidimensional space. “I want to work with you, we're on the same team here, we both want me to continue at this workplace and flourish...” is possible precisely because the space is not us-vs-them.
It's a little bit of a pipe dream but the ideal negotiation kind of sounds like, “oh, you're not able to pay me more than my manager? OK, what about getting me to be a team lead so that I am on the right trajectory? You don't have a spot for that? Well I have been thinking about starting a family, how about we explore a policy that would make it easy for me to take a chunk of that time off. No? What about these wonderful experiments with the four day work week, do you want to try those? Hum. Well, if we are really stuck on all of those, here's articles about how private companies with ESOPs beat the pants off of other companies, how can we get me some equity? Takes too long? I mean I can wait, just not forever. Want to meet in 30 days and we'll keep in touch on Slack about some of these ideas and float them to senior management?”
(Here notice that the “best alternative” is explicit, “we meet again about my career development in a month.”)
https://en.wikipedia.org/wiki/Getting_to_Yes
Like I said in a small aside, this actually has a weird parallel in Christian theology, which is one of my geeky interests. In particular the panreligious mystic Gurdjieff has a “Law of Three” where instead of creating an opposition, a dualism, a zero-sum “good vs evil, right vs wrong” scenario, you understand a Third Force as reconciling the other two.
So, the wind wants to push a boat in one direction, the waves want to push it in a different direction: but it is the operation of the sail and keel and captain/helm who has a destination in mind, which takes these opposing forces and creates a new reality, a Course or Journey. In this new reality both of the forces which would have opposed each other are actually satisfied, they come to a negotiated equilibrium where they each succeed. The wind did not quiet the waves and get it's way; the waves did not stop the wind. But because they are blowing freely in opposite directions, the mediation takes place and a larger space is realized.
So then it is fun to read Christian theology in this light. The idea is that the Trinity is actually viewable as precisely this sort of triad, and so in this sense of reality is negotiated reality, the Christian message is that God is a negotiation. And this sounds like New Age poppycock until you realize that it's basically the view of St Thomas Aquinas. Like all of the scholastics very much viewed the Trinity as an interdependence, you literally cannot speak of the Son without talking about the Father in a parent-child dynamic: that's what it means to be a son. And that dynamic you can't talk about without the spirit of familial love that pervades it, but that Spirit of love cannot be talked about independently of the parties involved either. And so the medieval view is kind of that God is sort of Unity at the core of existence, rather than Opposition.
So that's the stuff that I geek out about that informed my view on what negotiation is and how it works in the ideal case.
This gets them thinking about you as a market participant and not about how small a raise they can give you. Even if you don't have active offers, understanding your value in the market is really important.
I’ve tracked a few of those profiles. Startups they joined fail or struggle. I guess that’s how you make money.
Pension like you say is the obvious option, the other thing that may be useful is a salary sacrifice car scheme. If your employer doesn’t have a scheme, there are firms who offer turn key setup.
I might be missing something though, there might be a benefit to sal sac pension I don’t know about, if there is I’m. Definitely all ears!
Sal sac car does mean your salary agreement is reduced so you’re right, would affect mortgage application or credit in general. AVC’s don’t impact your salary but obv they do reduce your take home which a mortgage application will ask for anyway so prob not much diff between.
I haven’t taken the sal sac car option yet but I’m seriously considering it.
Your gross (pre tax) income is exactly what has been reduced too. So if you are sacrificing 10%, your gross is 10% lower too.
But it's not reduced, though, is it? If someone who isn't the tax office asks for my gross revenue I'll tell them what the gross amount that goes into my assets is. They don't ask "what's your gross income for tax purposes?"
It might be different if the sacrifice is for something that's basically essential for you like a company car. I could see that getting more scrutiny.
I worked in Munich, Germany for a while, and at least there, the average salaries (or even calculated recommended salary based on yoe, degree, tech stack, etc) on payscale, glassdoor etc were always significantly lower than what I've seen in real life... My friends' salary were higher, my salary was higher, the other offers were higher, the salary all my friends recommend me ask were higher etc...
And none of my friends were in a rare niche, none of them were FAANG, none of them had unique skills or background, and still...
I can only speculate as to why this is (not enough data, biased data, fake numbers, business model of the website is biased towards showing low numbers, my friends and I are better than average, who knows) but it's something worth keeping in mind.
generically, people are more likely to post on these compensation-sharing websites when they have gripes about compensation.
there's also the fact that many people take FAANG offers without negotiation (equity was often heavily negotiable) and you're looking at the average of a leftward-biased sample of a wide distribution.
There's also the growth factor consideration that probably isn't implemented by those websites. As in, salary data from several years ago might be not be adjusted for inflation and have the same weighting as recent salary data.
Half the time, the websites can't even gather salary info from job posts and rely on estimates despite having hard data.
What this can do is that less savvy users might not notice the estimated data tag and use the lower range in negotiations, which could ultimately lower starting salaries for workers moving forward.
I've written job boards before about this, but of course they aren't going to change anything as it isn't in the their best interests.
Where I work we don’t count holidays and I encourage all my reports to take full advantage. I’ve been on holiday twice (2 and 4 weeks) this year and take off a week here and there and I never have to worry about what I am going to do around Christmas, I always take another 2-3 weeks then.
But since “don’t count them” is a tad to vague for many people, just go for a high number like 50
I don't know about how it works in the UK, but in many parts of the US, certainly California, it's also an objectively bad deal.
If there is a stated amount of vacation time in your contract, the company has to pay out full salary for any vacation time you don't take, at the time of departure. Vacation is good, people should take it, but the incentive structure of "unlimited vacation" is skewed towards less actual vacation, and no compensation for that choice in the event.
If someone offers unlimited vacation, take them up on it! But make sure that the contract says "four weeks guaranteed, plus whatever other time you want". If it's unlimited, then it should be the same deal, right? This is also a good way to gauge if the unlimited vacation comp is going to be undermined by pressuring workers to stay on the job.
About the pressure part that is also totally true. I don’t think “unlimited” is possible at most companies. It has to be part of the culture. That is why I find it important to encourage people to take holidays and do so lavishly myself. It also isn’t so much unlimited as much as we simply don’t keep track. It wouldn’t be ok in most cases to take 2 months in a row, although it has happened. Also, we work in shapeup cycles and usually prefer people to not take last minute holiday within a project.
As I said this is all pretty vague and yet it is amazing for everyone who works here.
I do hiring on the engineering team and in this case it really works against us because it simply is too vague. It has a high “trust me it’s cool” character that a specific number would fix. “50 days” sounds more clear.
You really need clarity on how much time is allowed so you can calculate how much are you making per hour spent in that company. In the end I was taking all the holidays who were mandatory in the country I was living and no more - and people were really pissed off.
American people were taking zero holidays to show they were "committed to the company". I know some people had conflicts over taking too much holidays.
Overall, you end up with people at the extremes doing too well or too bad and average people being more on the bad side than on the good one, trying to impress their managers.
Want £100k? Find the appropriate level on the site that has that rate and make an argument that head of development is that level. You can make this argument for basically any level, with that title, so this alone might work.
Probably argue that now you have line manager responsibilities alongside development requirements you feel the salary bump doesn’t adequately reflect the much greater workload, especially without additional equity.
I think glass door like services tend to underreport normal-high salaries for various reasons but London is also very low for its expenses and I would look around at nearby markets. Even if you wouldn't want to leave the UK its easier to anchor some firms on other markets now that work location is more flexible.
EDIT: you say equity only pays off if they sell the company. What is the exit strategy for this company? Are they looking to be bought, and are there any obvious buyers? Is this more a lifestyle business for the founders?
If they don't have an exit strategy, then I'd say don't go for equity until that situation is clearer.
The second company just ran out of runway and failed.
if I were you, I would push for more equity. as that's you're likely to gain the most. more salary is just money for the king / queen and their shenanigans.
I’d also say £40k was way too low. I’d guess the founders have significantly higher upside. It would be worth asking for transparency in order to determine fair compensation.
With that out of the way, the core thing to consider here is valuation. 0.2% might be small, or it might be life changing money in the case of a sale, in my case at a similar amount of equity it resulted in a deposit to buy a house rather than buying one outright. What does 0.2% translate to at different sale prices, and does it feel like reasonable compensation for the effort you’ve put in? In terms of salary you’re pretty much at the top end of the scale for small startups with entering the C-suite already. You could maybe get another 10k or so, but if you do that forget about extra equity as well.
Secondly, it’s worth considering if you want the extra stress of being a manager. It’s a different skill set, and a different kind of work. Some people love it, others don’t. Personally I spent five years or so gradually working my up the management tiers, by the end the money was great (in the order of £150k a year including bonuses), but I hated every minute of every day. Eventually I decided I’d had enough and took a huge pay cut to go back to writing code all day for a startup, and I’m a whole load happier for having done so.
I transitioned from senior engineer to engineering manager a couple of years ago. Maybe it's just this company, but I feel I enjoyed being an engineer more. Definately less meetings and less stress. Plus when you go to the next job hunt, there are more engineer jobs available.
On the other hand, if you feel that your engineering skills are a bit lacking (no offense intended), but your have strong soft skills, then it would make sense to go this route. The best head of engineering I worked for was a mediocre developer, but his soft skills were amazing.
At the very least you’re going to have to learn how to write code while being regularly interrupted, and in my experience that means you’ll have to let go of doing anything interesting because you’ll end up blocking work due to unexpected things coming up.
You'll never actually know how much you are worth until there are offers on your desk. Actually having offers is the ultimate negotiation card that makes sure you are realistic (neither extremely delusional, nor underselling).
Of course, I recommend you still negotiate politely and respectfully (e.g I wouldn't actually say that I have 3 competing offers).
Once I asked my manager about the salary raise schedule, he said company wide is once a year (and that was like 8 months away for me), asked him once again in a week to confirm, next Monday I handed in my resignation.
If you expect the company to continue to exist, equity might be useful to 'spread out' your income, so that you continue to earn dividends from the shares after you've changed job and have a different financial situation. However, you say that the company is not profitable, so you won't get any dividends until it is - and that the directors choose to issue them. They are under no obligation to distribute dividends even if they are profitable.
In summary, I can't answer this question:
> What salary feels right to ask for?
...but I can answer this question:
> Should I ask for a lower salary to avoid tax brackets but more equity in return?
No, because:
A: The tax brackets aren't a problem, only a disappointment - a pay rise will still earn you more than before.
B: There's no indication that your company will choose to distribute dividends in the near future (especially because it is not yet profitable and may be acquired).
C: You might have trouble selling your shares individually if the company isn't publically listed, and you might be waiting years for an offer from some mega-corp.
If I were you, I'd only negotiate for equity if I was absolutely confident that the company was going to be bought out for a good price, meaning I could take advantage of capital gains tax being lower than the 'higher' or 'additional' rates of income tax.
If you want equity -- which means that you feel really good about this company's chances -- you want actual non-revocable ownership now. Be entered on the list of shareholders.
"if you leave it's at the company's discretion" means that it doesn't exist unless you are still employed there on the day of a sale. That's not equity, that's not a lottery ticket -- that's the promise that maybe someday there could be lottery tickets. Ask for the actual lottery ticket now, or discount it right down to zero no matter how much they offer you.
Yup. Wish I (and a lot of my ex colleagues) knew that and didn't accept below market salaries with those ESOPs.
We got ESOPs from a USA startup which has an India office (and subsidiary which employed us) and was laid off from the company. A colleague (was laid off) tried to sell it outside and was blocked by startup lawyer. Very soon those ESOPs will expire/lapse (not sure that's the term) if not exercised. Most of us (actually none of us) can reasonably exercise that. Even at that low "strike price" that was offered to us the cost to company alone will be more than 2 years' salary of most of us (for some even more) and then the income tax (and then maybe capital gains tax) will hit us which might actually be more than that strike price amount. It's in USD and we earn/earned in INR - almost ~85x difference as of now (notionally speaking).
The startup doesn't offer to buy it themselves either. They never did. I stayed there for two years and others stayed for 4-5-6 years and they don't allow us to sell it in secondary market either. So yeah, it's lost. Even if we want to, we can't exercise - we simply can't afford it.
So yes, you are so right!
What's the rationale for having the tax rate drop at £125k? (Rather than stay flat or increase.)
https://www.gov.uk/income-tax-rates
But did you know you could be subject to an effective combined rate of income tax and national insurance of 62% if you earn over £100,000?
The 62% tax trap refers to the income band falling between £100,000 and £125,140 on which the employed or self-employed will effectively experience an income tax rate of 60% alongside national insurance contributions of 2%.
This is because for every £2 you earn over £100,000 per annum, you lose £1 worth of your £12,570 tax-free personal allowance. Your tax rate only reduces to the additional rate of 45% after the entirety of your personal allowance for that year has been eroded, i.e. on income above £125,140.”
Source: https://www.theprivateoffice.com/insights/have-you-fallen-vi....
I found this easier to understand
https://taxscouts.com/high-earner-tax-returns/60-tax-what-to...
So, if you earn 100K, the first 12.5K of your income is not taxable
If you earn 105K, the first 10K is not taxable
If you earn 125K, there is no non taxable amount.
So the tax rate gets applied two times, that's why the strange thing between 100K and 125K happens
You can get around this with salary sacrifice pension, which can push your pre tax income down bellow the critical levels. But most employers refuse to offer it.
At a small company, you might be able to make them do it.
You get significantly punished for breaching that 100k. So if you’re going to tip over, you needs to smash through it.
Congrats.
Then just SIPP enough to get below 100.
Not much you can do beyond that. There is the EIS and SEIS scheme but that only starts making sense a bit higher.
Certain types of uk share schemes you can transfer directly into ISA rather than realising it (up to 20k a year potential now bit more with that Brit isa thing). You’d need to check whether it applies to your situation though - not all company schemes are eligible
Why should you be paid less than a consultant, or why are you more valuable than a consultant? Answer those questions and you will arrive at a fair number for all parties.
If what you said was true, why would anyone be a consultant rather than an employee? They would be paid the same, and manifestly, they are not. Revisit your assumptions.
It can be humiliating to learn how structured negotiations are and that most talent goes into them completely ignorant of the tools that are being used on the other side of the table, but that awareness is where we all start. The difference in the opinions of people who have read even a single book on negotiations are stark to those who haven't. Highly recommend.
They create flexibility for the business. The idea that consultancy rates are a good guide for employee pay makes no sense.
An employee should know the consulting rate and then decide what kind of discount or premium they should anchor the discussion to. Employers try to get employees for about 50% or less of the consulting rate as salary, where an employee with unique value can get anywhere from 60%-120% of that in total comp factoring in equity and bonuses.
If you need the job, take what's on offer, but if you have any bargaining position at all, for the sake of your well being and profession, learn negotiation. An employer or hiring manager who tries to bully or gaslight you on this has told you most of what you need to know about them.
Employers don't set employee pay at some lower percentage of consultancy pay. And neither do they set consultancy pay as some higher percentage of employee pay. They are distinct markets. You won't get far as an employee if you try to negotiate based on the consultancy pay rate.
If the talent you are buying can decide between your job and a consulting gig, you have no separate markets. What absolutely aren't the same things are the negotiating techniques of high value talent vs. low skilled labor.
Employers don't "set" pay either, they are in a market, and if a candidate knows what that company pays for a related service, they can anchor their bid to it. The exception is the minority of collectively bargained jobs.
Sure, if the company is a commodity talent shop or an institution that buys talent by the pound, then there's a race to the bottom to be the most liquid asset you can be for a mature company with limited growth in front of it. If you're actually good at anything and deliver value, consulting rates are one of many leverage data points.
Be extra suspicious of anyone who tells you to take less risk, as it's cheap and not high quality advice.
I'm merely saying that negotiating based on a value that doesn't apply to your market will probably not be an effective strategy.
Take all the risk you want, just don't take them based on evidence that doesn't apply to you.
If this were a negotiation between us, and even though I've got other sources of data for framing the discussion, trying to disqualify a comparison with just persistence is a sign of poor faith. I would have walked (and have walked in similar situations) a few comments back. Your BATNA would have been to get the next more agreeable person, my BATNA is based on being able to afford principle, and this market would have settled on someone who delivers value at a level more appropriate to your needs.
I'm only saying that people should negotiate based on data that actually applies to what they're after.
But I'm repeating myself, and I don't understand where you are coming from.
Comparing their salaries ( what they actually make in the end ) with perm salaries, and factoring in the various risk premiums/ contract differences makes sense I think.
I guess it makes sense to compare them if you are considering moving from one to the other. The consultant gets paid more, but has a different tax, expense, benefit and risk profile. The rate itself is only one part of that overall calculation.
Which brings me back to the start of this thread, where I pointed out that consultants get paid a higher rate but the costs and risks are also not the same.
I agree with other posters, unless there's a clear strategy to cash in on the equity, you can consider it (to put it nicely) a bet with bad odds. You say you're friends with the founders, that should decrease the chances of you getting screwed over but it's still a possibility. And that's in the unlikely scenario that you can cash in your shares.
A question for you - if you can get a job at a company with a higher total comp (RSUs, bonus etc), why don't you? If the answer is you haven't looked at this but would be willing, get an offer and come back with it to your founders. You can do that after they give you this current raise.
Also, beware, management is different from doing everything yourself :)
Thanks for the suggestions! I could definitely shop around. I don’t have time in this round of negotiations as need to give a counter offer next week. I also really enjoy working here, it’s a good set up.
I'd think about "what real offer would I need to up and leave?" and then spend a certain portion of your week pursuing that kind of offer, maybe start by finding a friendly recruiter to take the strain. You can let your friend know that offer when you get it, and what discount you'd take to continue to work with them (if any).
You might end up feeling like a crummy time for tech work (in the UK at least), and a good time to be settling for a lower salary doing interesting work, or you might find a crazy well-paid niche for your expertise that you never knew existed.
I hear what you're saying that you feel your expertise with their code & domain puts your in a position of maximum leverage, but I doubt your friendly founders see it that way. If I were advising them, I'd be urging them to consider nobody is irreplaceable (even if they end up paying someone new higher than they ever considered paying you). I'm sure your 1-2 year estimate for a run-in is pessimistic.
Would you consider a high day rate for contracting and let the employment and equity slide? If the company sold for £100m tomorrow and you got £200k, that sounds nice - but is it likely compared to the opportunity cost of working towards a real career ladder? Is it possible that they could dilute that 0.2% away? idk man, it doesn't seem like something I'd consider compared to salary.
Also - as others have said - don't bring your other income or into your salary negotiation (or let your employer do so, if they're aware of it). It's not relevant.
Sorry, not a complete strategy, but good luck with it.
Agree 200k isn’t going to be life changing when looking over the lifespan of a career, just quite a bit of fun, so won’t let that be the biggest sway - and it’s probably a best case scenario.
Dilution is something I’m very nervous of in perusing an equity strategy, but just don’t know how to calculate my exposure to it. I just don’t understand the topic enough.
There will be something that feels bitter if the company does sell for that figure and the guys/girls cofounders all land on a few million and me on 200k despite having done a significant amount of the code leg work. But probably bigging myself too much there.
- I don’t really see senior engineering IC salaries below GBP 100k
- “Head of” roles are materially higher than IC roles, mid-to-high-100s.
- All of my experience is London-based so there is likely a premium compared to a market like Manchester
- There are a lot of other factors, so don’t take this as gospel, but unless it you are in a hot market like AI, your business is probably getting a 5-20x multiple on ARR - the fact that your business growth is so impressive and near profitable makes the top end of that achievable. If the primary goal is to get to 10M and the founders want to sell “sooner than later” then you probably need to mentally prepare for an exit of around 50-200M, or an outcome for you of 100-400k. The math changes significantly if the business doesn’t plan to exit for longer. But say you got 200k, does that make up for several years of below market salary and risk?
- You’ve been at the biz for 4 years? I know you say there’s no vesting schedule but usually equity vesting happens over 4 years, so you should be due for another grant if the business was in line other tech businesses
If I were in your shoes I’d definitely push for more equity. You’ve been at the business long enough to be eligible for another grant. You should make sure that, if the new grant has a vesting schedule, the entire grant automatically vests as part of an acquisition/change of control
And you also should be able to push a lot harder on salary, but again I can’t speak for the Manchester market.
Having been in the business for so long, and having received an offer for a role that you describe as critical to its success, the business should be willing to compensate you accordingly.
Something else to consider looking into is the business plans for profitability. It is not abnormal for profitable tech to pay bonuses. So if the business is indeed planning to be profitable, it could be a way for you to get outsized additional compensation if you’re willing to take some risk.
**And finally, it sounds like you have an unfair equity deal - largely at the company’s discretion? At this point all of your equity should be fully vested, and under EMI you should be able to exercise your options for a negligible amount of money. You should work really hard as part of your negotiation to get a better deal here for the existing equity, so you can own real shares of the business. And then you’ll loosen some of handcuffs - incentivizing the business to issue you a new grant as a retention strategy.
- Do you have any sources for where you’re seeing salaries at 100k upwards? Anything online, or is this offline advertised roles? I’m going to need some evidence points to support my counter offer. I think a few senior salaries to solidify a low of 100s and a few head of salaries to set a benchmark will be helpful if I can find them.
- It’s not an AI business, but does leverage it. I think the 100k-400k at 0.2% isn’t a game changer, but double or triple that would be. Where are you getting your ARR multiple estimates from? I don’t doubt you, it just helps me assess my position.
Yeah I feel my equity offer is probably unfair, but didn’t know any different when accepting it sadly. Do you have any resources I could read to educate myself more about what I should be specifically asking for in a negotiation and how it works.
Senior salaries nowadays can go from £85k to £120k depending on the company size and how important engineering is for them. Also any "Head of" confident of their value and expertise is likely on the six figures
- No online sources. This is first hand data for engineers that have worked on my teams.
- Here are some resources [1] [2] [3]. During the boom a couple years ago, multiples got way higher - at the time I worked at a company that got valued at 26x. But that's not very realistic these days except for particularly hot companies. The median for SaaS is probably around 5x. But you get more points if you're growing fast, etc.
- Here are some resources [4] [5] [6]. Normally you'll see the first employee - especially the first engineering hire - get around 1%. That number drops quite quickly after the first employee. So based on your circumstances it seems you're below benchmark by around 5x, and that's further compounded by how early the founders want to exit (i.e., if you were an early employee of Instagram, then 0.2% would actually be a lot. But 0.2% of a business that wants to exit at $10M ARR doesn't make up for your risk).
[1] https://www.saasacademy.com/blog/saas-company-valuation-metr...
[2] https://feinternational.com/blog/saas-metrics-value-saas-bus....
[3] https://aventis-advisors.com/saas-valuation-multiples/
[4] https://www.hustlefund.vc/blog-posts-founders/equity-for-ear...
[5] https://www.wing.vc/docs/early-stage-hiring/how-to-determine...
[6] https://www.linkedin.com/pulse/equity-equation-mastering-fir...
A 10k pay rise is nice, but you will be taking on a lot more responsibility, and they will want someone they can trust.
Always worth asking for a bit more than their offer of course. There isn't really a downside to that unless you are being really unreasonable.
Next, work out where you want to be in terms of comp in a few years, rather than thinking of how to optimise the cash right now. For example, I'd stop worrying about your tax-free allowance gradually disappearing, and instead try to work out how to get it to all be gone. In 5 years, the person who makes £120k is £40k better off than the person who makes £100k, after tax. That... sounds worth it. And it's usually easier for the person who's getting paid £120k to get paid £130k than it is for the person who's getting paid £100k. This is to say, having high tax brackets is a benefit, not a curse.
And then, it's probably worth noting - this isn't directly their money, especially if they're looking to sell. It's probably worth having the conversation of like, 'what would I need to do in order to justify £100k/year?'. Or, alternatively, negotiating on the vesting of your stock, since that's effectively free. If they think the company is going to be sold in the next few years, that's a relatively small giveaway for you. If the company's grown a lot in four years, it's unlikely a significant increase in stock is on the table.
Don't overestimate how long it'd take a good new person to catch up. I've rarely seen a role where a new person can't be effective within 6 months.
Essentially, if I pay you £15k for some services, you pay income tax on that £15k. If I buy you a car for £15k, taxman still wants £15k. Same with equity.
How it can work is that you can be granted shares and pay the taxes at time of granting (which for a founder is zero), but might not be nice for an employee.
You can also give an employee options, and this can get complicated (single or double vest).
But in general, for any equity instrument in a stock plan, you get charged income tax at one stage, then capital gains at a later stage, and you can trade off when you want to trigger each. In this case, employer has gone for a model where income tax is deferred as late as possible.
If you earn over 125, you are still paying that 60% or so on the 25k between 100 and 125. Your effective tax rate drops a bit as you earn over that, but you don't avoid the tax in that interval.
The first thing I'll say is, advice about negotiating hard—thinking through BATNA and all that—is not wrong, but it's also a specifically American perspective that you don't want to deploy blindly. Doesn't matter what culture you are in, personal relationships matter, so be thoughtful.
That said, you also don't want to be taken advantage of. It seems implied one of the co-founders is technical, but you're leading most of the code/infra level technical work, and you aren't easily replaced. It's hard to know just from this how strong your position is though. Are you the strongest engineer technically? Are you an ideal fit to lead the next phase of growth? If the answer is yes to both, then $75k + 0.2% equity feels light.
I never had EMIs, but I understand they are more or less equivalent to ISOs. A legit engineer #1 that serves as a tech lead should get 1-2% as a rule of thumb. In this case though, you say you started as junior, so 0.2% may have made sense, but you've grown and are contributing a lot more. Equity should not be a one-time thing, especially as you step into larger roles.
You're right folks advise against sacrificing cash salary for equity in private companies, because a huge percentage will go to zero. Yes, it's a lottery, but in this case you're already working for this company, and the trajectory already sounds better than 90% of startups (although "almost profitable" could be spin), so equity gives you upside. Note it's also easier for them to give you more equity because it doesn't require precious cash, and the sooner they give the equity the more valuable it will potentially have (lower strike price).
Also, I definitely agree with folks saying that your personal living situation should not factor into negotiations explicitly. What matters is your worth to them, not your expenses. That said, if you are comfortable that you can take more equity, and you believe in the trajectory of the company (and the financial acumen of the founders), and you can afford to take the risk, equity is what mints millionaires and create a real sense of cohesion in the core team. On the other hand, if you don't feel solid about the company's future and don't feel embraced by the inner circle, then just ask for as much cash as you can.
Answers to your questions: - 3 of 5 founders strongly technical, one exceptional, one strong but she is not involved with my line of work/ probably couldn’t do it, on par with the other, and above all other devs. - trying to be modest, but almost definitely ideal for next phase of growth if they want to maintain momentum and trajectory. Would be a big hit to lose me. 3 months to hire a new lead, 6-12months to get up to speed, but longer to understand the industry/code which is nuanced, often weird and undocumented. - 1-2% is how I feel too, but just feel they would never give this. I’m very critical and pessimistic, but genuinely feel this is the one which could break through.
I just don’t believe the decision makers believe that any head of role justifies more than 100k or more equity so it’s going to take a lot of educating..