Negotiation Tips — from The Holloway Guide to Equity Compensation

The following excerpt is from The Holloway Guide to Equity Compensation, a detailed reference with hundreds of resources on stock options, RSUs, job offers, taxes, and more. You can read more from this excerpt, or access the full guide text here.

THE FULL VERSION OF THIS GUIDE ANSWERS QUESTIONS LIKE:

What tactics can I use to negotiate a better startup job offer?

Is it legal for a company to ask about my current or past salary when making a job offer?

What are some tips for negotiating a good compensation package with equity?

During interviews and job offer negotiations, companies always ask what type of compensation you expect. You should be cautious about answering. Here’s why… If you name the lowest number you’ll accept, you can be pretty sure the company’s not going to exceed it, at least not by much.

That said, asking questions and talking about salary expectations is a normal part of the hiring process. However, be sure to check your local laws as asking about salary history has been banned in a growing number of states, cities, and counties. These laws were enacted in an attempt to combat pay disparity among women and minorities, making it illegal for companies to ask about or consider candidates’ current or past compensation when making job offers.

A few points to consider when negotiating your compensation:

• If you are inexperienced and unsure what a fair offer should look like, avoid saying exactly what you want for compensation very early in discussions. Though many hiring managers and recruiters ask about salary expectations early in the process to avoid risk at the offer stage, some ask in order to take advantage of candidates who don’t have a good sense of their own worth. Tell them you want to focus on the opportunity as a whole and your ability to contribute before discussing numbers. Ask them to give you a fair offer once they understand what you can bring to the company.
• If you are experienced and know your value, it’s often in your interest to state what sort of compensation and role you are looking for to anchor expectations. You might even share your expectations early in the process, so you don’t waste each other’s time.
• Some argue that a good tactic in negotiating is to start higher than you will be willing to accept, so that the other party can “win” by negotiating you down a little bit. Keep in mind, this is just a suggested tactic, not a hard and fast rule.
• Discuss what your compensation might be like in the future. No one can promise you future equity, salary, or bonuses, but it should be possible to agree what those could look like if you demonstrate outstanding performance and the company has money.
• If you’re moving from an established company to a startup, you may be asked to take a salary cut. This is reasonable, but it’s wise to discuss explicitly how much the cut is, and when your salary will be renegotiated. For example, you might take 25% below your previous salary, but there can be an agreement that this will be corrected if your performance is strong and the company gets funding.
• If you’re going to be a very early employee, consider asking for a restricted stock grant instead of stock options, and a cash bonus equal to the tax on those options. The company will have some extra paperwork (and legal costs), but it means you won’t have to pay to exercise. Then, if you file an 83(b) election, you’re simplifying your situation even further, eliminating the AMT issues of ISOs, and maximizing your chances of qualifying for long-term capital gains tax.
• Always negotiate non-compensation aspects before agreeing to an offer. If you want a specific role, title, opportunity, visa sponsorship, parental leave, special treatment (like working from home), or have timing constraints about when you can join, negotiate these early, not late in the process.

Although offer letters have expirations, it’s often possible to negotiate more time if you need it. How much flexibility depends on the situation. Some have criticized “exploding job offers” as a bad practice that makes no sense at all. If you are likely the best candidate for the position, or the role is a specialized and well-paid one where there are usually not enough good candidates to meet the demand, you’ll likely have plenty of leverage to ask for more time, which may be needed to complete the interview process with other companies. Software engineering roles in tech companies are like this currently.

Getting multiple offers is always in your interest. If you have competing offers, sharing the competing offers with the company you want to work for can be helpful, granted your offers are competitive. However, dragging out negotiations excessively so you can “shop around” an offer to other companies is considered bad form by some; it’s thoughtful to be judicious and timely to the extent that it’s possible.

No matter what, always remember: Do not accept an offer verbally or in writing unless you’re ready to stand by your word. In practice, people do occasionally accept an offer and then go back on it, or renege. This can put the company in a difficult position (they may have declined another key candidate based on your acceptance), and may hurt your reputation in unexpected ways later.