Everything startup employees need to know about compensation

Emily Kramer
Sep 22, 2020 · 7 min read

What to ask before you accept a job offer

After leading marketing and exposing the gender equity gap while at Carta, and recently filing a lawsuit against the company alleging unequal pay and gender discrimination, I’m determined to help candidates better understand compensation. This post is the first in a series to help startup employees understand compensation from Help Wanted Project — we offer free salary and equity reviews.

Understanding a new job opportunity and offer should be a straightforward process for candidates, unfortunately, it is far from it. You are selling yourself short if you simply evaluate the offer against your current salary. Instead, you need to make sure you understand how the company determines total compensation (salary, equity, bonuses, benefits), how career progression and compensation increases work, and how to value the details of your offer. Doing this diligence will help you feel more confident that your offer is fair and that you have a clear path for career progression.

The process of evaluating a new career opportunity is challenging because companies typically aren’t very forthright about career development and compensation practices. It’s a bit surprising that startups don’t tell you how they determined your title and salary, while touting transparency and telling you all about their free lunch (to learn why compensation is broken, check out this post). But until companies improve, you need to advocate for yourself and do your own diligence before joining to set yourself up for success. This post outlines exactly what to ask.

In order to make an informed decision about a new job opportunity and ensure you will be compensated fairly, make sure you understand:

  1. How the company determines salary and equity for each role: If you don’t know this, you don’t know if the company is making an attempt to compensate all employees fairly and won’t know the best way to neogitate.
  2. How career progression and compensation increases work at the company: Make sure you’re earning what you need to today, and that you will have opportunities to grow in your career.
  3. How to value the details of your offer, including salary, equity, bonus, and benefits: Your offer most likely won’t have all the details you need to calculate total compensation, and you’ll need to ask some questions. (My next post will cover this topic)
What to ask before you negotiate or accept an offer

1. Learn how the company determines salary and equity for each role

The best way to make sure you are getting compensated fairly is to understand the process the company uses to determine salary and equity. If the company doesn’t have a clear process or won’t tell you the basics of how compensation is set, they likely don’t have a regularly adjusted and audited system. If there’s no system, it is very unlikely compensation is fair for all employees.

How to ask these questions

Asking questions about these topics will make you seem curious and educated about how compensation works, but not everyone asks them. Junior recruiters might be surprised by some of these questions, but these questions should not be off-putting if phrased correctly. Also remember, if the role has hiring manager responsibilities, these questions are not just important for your own finances. They will also impact your ability to grow your team.

  • When to ask: Pre-negotiation. The more senior you are, the earlier in the process it makes sense to understand compensation philosophy.
  • Who to ask: Recruiter or CEO at early-stage startups (don’t ask hiring managers these questions—it’s better to ask them questions about the role and team)
  • Where to ask: On phone or in email is fine. But I like to get everything in writing if possible, as it’s easier to understand and refer back to this way.
  • How to kick off these questions: “In order to evaluate the opportunity, I’d like to get a better understanding about how compensation and career progression work at [company].”

Question 1: “How is salary determined at [company]?”

Always ask. The goal here is to make sure there is a system and to make sure you won’t be paid differently than someone in the same role with the same qualifications. These questions also set the groundwork when you get the offer to know how to negotiate effectively.

Follow up questions:

  • Do you have set salaries or compensation bands (a compensation band is just a salary range) for each role?
  • (If relevant) Do you adjust salaries based on location?
  • (Optional) What benchmarking data do you use to figure out salary?
    Note: This question is useful if salary seems low or if you are the first person in the role. Typical answer is Radford, but not all companies will tell you. Some companies will tell you what percentile they use too. As in, we use the 75th percentile for each role based on Radford data.

Question 2: “Can you tell me more about equity comp at [company]?”

Always ask. The goal here is to make sure there is a system and to understand how this company thinks about equity, specifically how employee-friendly their equity practices are. These questions also set the groundwork for benchmarking your equity and negotiating effectively once you have an offer.

Follow up questions:

  • Do you have set equity bands for each role too?
  • Do all full-time employees get equity?
  • (Check your offer) How long do employees have to exercise/buy their options once they leave?
    Note: To actually own stock in your company, you must exercise (meaning buy) your options after they’ve vested. You can do this anytime when you work at a company, but after you leave you only have a set period of time to exercise options. This window is typically 30 or 90 days. This is a really tight timeline and is often an unexpected expense. Some companies offer a lot longer; I’ve seen up to 10 years. This is a huge advantage, as it gives you more time to evaluate if the company will be successful or save up money to buy your options. You should always check your exercise window in your grant (or ask about it).
  • (Optional) What benchmarking data do you use to figure out equity?
    Note: Typical answer is OptionImpact or “from our investors”. This question is useful if you are struggling to benchmark your equity and want to make sure it is fair, if you are the first person in the role, or if it seems low.

Question 3: “Do you negotiate compensation?”

Optional question. If you already have an offer, you can just try to negotiate and not ask this question. But, I think it’s helpful to know before you get the offer to set your expectations and have more confidence kicking off the negotiation process.

Notes: If they say no and have set compensation for each role, that makes sense—they won’t make exceptions because everyone in the same role makes the same amount. If they don’t have set compensation and they don’t negotiate, assume people are negotiating anyway. They are likely just trying to discourage you from negotiating.

2. Learn how compensation and roles progress once you join

It’s important to understand in advance how compensation adjustments and promotions work, especially if you are considering two similar offers or trying to progress to the next level. If there is a vague process, or on the flip side a super rigid process, it may be more difficult to move to another role in the future.

Question 1: “How do promotions work?”

Optional questions depending on your role. This question is especially important if you are making a lateral move in terms of title, or taking a step down in terms of title.

Follow up questions:

  • Is there a set time of year that promotions happen or can a manager choose to promote someone anytime?
  • Are there any expectations for how long I need to be in this role?
    Note: Some coordinator or entry-level roles are expected to stay in the role for a certain period of time; it’s good to know this in advance.

Question 2: “How and when does [company] do compensation reviews?”

Optional question. Important to ask if you are taking an offer that’s lower than your expectations.

Follow up questions:

  • Do you do annual compensation reviews?
  • How do compensation reviews work? Can you only get a compensation increase at promotion?
  • How often do you review and adjust compensation bands?
  • Sometimes companies review benchmark data every year or review inflation or cost-of-living changes and make increases regardless of performance.
  • Is an equity review part of compensation reviews? (see next question)

Question 3: “Do you grant additional equity to employees during their tenure?”

Always ask. Some companies offer “equity refresh” grants, meaning if you are performing well in your role and/or are promoted they will give you another equity grant with a new start date and vesting period.

Follow up questions:

  • How frequently do you give equity refreshes? Only at promotion? Only after the first grant is fully-vested?
  • Is this part of the compensation review process? (see above question)

Question 4: “Do you have levels for each role?”

Always ask after ~50 employees. You want to make sure you are being placed in the right level with the right title because your level typically determines your compensation and career progression. The more you understand about the requirements for each level, the more leverage you have.

How levels work:

  • Multiple titles or roles usually match with one level.
  • Each level corresponds to a compensation band.
  • For example, a content marketing manager and a business development manager might both be business level 4s, which correspond with a salary range of $110-$130K and 15,000 shares.
  • If you don’t think your compensation is correct, it might be that you are being put in the wrong level.
  • If you are the first person in a role, you may need to discuss what level or roles are being used to benchmark your offer.

Follow up questions:

  • Do you let employees know what level they are in?
  • Are there clear requirements for each level and how to get to the next one?

Candidates usually just focus on salary and sometimes equity, bonus, and benefits when they get an offer. But understanding how compensation works and how your career will progress is crucial to evaluating any job opportunity. I recommend understanding these factors before you begin negotiating.

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