A senior engineer came to me with two offers. Company A: $195K base. Company B: $175K base. "A pays more," she said, "so I'm going with A."
She was about to leave $150,000 on the table.
Company B had RSUs worth $120K annually at current price. Company A had options that might be worth something someday. When we calculated total compensation properly, B paid $295K versus A's $215K. The "lower" offer was $80K better.
This happens constantly. Engineers focus on the number they understand—base salary—while ignoring or miscalculating the components that often matter more.
After analyzing over 400 offer comparisons at SmithSpektrum, here's how to actually calculate and compare total compensation[^1].
The Components of Total Compensation
Total compensation isn't just your paycheck. It's the sum of everything of value you receive.
| Component | Description | Predictability |
|---|---|---|
| Base salary | Fixed cash, paid regularly | High |
| Annual bonus | Performance-based cash | Medium |
| Signing bonus | One-time cash at start | High |
| Stock/Equity | Company ownership | Low to High |
| Benefits | Insurance, 401k, perks | Medium |
| Other | Relocation, stipends, etc. | Varies |
The formula seems simple:
Total Comp = Base + Expected Bonus + Equity Value + Benefits Value
But each component has nuances that change its real value.
Base Salary: The Foundation
Base salary is the only guaranteed component. It's what you'll actually receive regardless of company performance, your performance ratings, or stock price movements.
Because it's guaranteed, base salary should be weighted more heavily than variable compensation. A rule of thumb: $1 of base is worth roughly $1.10-1.20 of expected bonus and $1.25-1.50 of expected equity value (accounting for risk).
When comparing base salaries, adjust for taxes if offers are in different states. A $200K base in Texas ($0 state income tax) is worth more than $200K in California (~10% marginal rate).
| Location | Effective Base (Post State Tax) |
|---|---|
| $200K in Texas | $200K |
| $200K in Washington | $200K |
| $200K in California | ~$180K |
| $200K in New York City | ~$176K |
Bonuses: Expected vs. Maximum
Bonus structures vary significantly. What matters is expected value, not the maximum possible payout.
Annual Bonus
Most companies express bonus as "target percentage"—the bonus you'll receive at expected performance.
| Bonus Term | What It Means |
|---|---|
| 15% target | You'll likely receive 15% |
| 0-30% range | Average is probably 15%, varies with performance |
| Up to 20% | Maximum is 20%; expected is often 10-15% |
To calculate expected bonus value, ask: "What percentage of employees hit target bonus?" and "What's the average payout as a percentage of target?"
At most companies, average payout is 90-110% of target. At aggressive companies, it might be 80-120%. Use the midpoint as your expected value.
Expected Annual Bonus = Base × Target % × Expected Achievement %
Example: $180K base × 15% target × 100% expected = $27K expected annual bonus
Signing Bonus
Signing bonuses are one-time payments. Don't annualize them for comparison—instead, amortize them over your expected tenure.
If you plan to stay three years, a $60K signing bonus adds $20K per year to your effective compensation. If you stay one year, it's worth the full $60K in that year.
Most signing bonuses have clawback provisions requiring repayment if you leave within 12-24 months. Factor this into your math.
Equity: Where Most People Get It Wrong
Equity is where offer comparisons go sideways. The number companies quote is rarely the number you'll receive.
Public Company RSUs
RSUs (Restricted Stock Units) at public companies are the most predictable equity form. They're worth the stock price at vesting.
| Information Needed | How to Get It |
|---|---|
| Number of RSUs | Offer letter |
| Current stock price | Public markets |
| Vesting schedule | Offer letter |
Calculate annual value:
Annual RSU Value = (Number of RSUs ÷ Vesting Years) × Current Stock Price
Example: 1,000 RSUs over 4 years at $150/share = 250 shares × $150 = $37,500/year
The complication: stock prices change. For comparison purposes, use current price as your baseline. For risk assessment, consider whether you believe the stock will rise or fall.
Conservative approach: discount RSU value by 10-20% when comparing to cash, reflecting price uncertainty.
Private Company Options
Stock options at private companies are much harder to value. You need:
| Information | Why It Matters |
|---|---|
| Number of options | Your share count |
| Strike price | What you pay to exercise |
| Fully diluted shares outstanding | Your percentage ownership |
| Latest 409A valuation | Current "paper" value |
| Latest preferred price | What investors paid |
| Vesting schedule | When you get them |
Calculate your ownership percentage:
Ownership % = Your Options ÷ Fully Diluted Shares × 100
Example: 50,000 options ÷ 20,000,000 shares = 0.25% ownership
Then estimate value. This is where it gets speculative.
Paper Value = Options × (Current Value Per Share - Strike Price)
If current 409A is $2/share and your strike is $0.50:
50,000 × ($2.00 - $0.50) = $75,000 paper value
But this isn't cash. To convert to expected value, multiply by probability of liquidity and discount for time and risk.
The Startup Equity Discount
Startup equity should be heavily discounted because most startups fail.
| Company Stage | Probability of Meaningful Exit | Discount to Apply |
|---|---|---|
| Pre-seed | 5-10% | 85-95% |
| Seed | 10-15% | 80-90% |
| Series A | 15-25% | 70-85% |
| Series B | 25-35% | 60-75% |
| Series C+ | 35-50% | 50-65% |
| Pre-IPO | 60-80% | 20-40% |
A risk-adjusted valuation:
Expected Equity Value = Paper Value × Probability of Exit × Expected Exit Multiple Adjustment
Example: $75,000 paper value at Series A with 20% exit probability = $15,000 risk-adjusted value
For comparison purposes, treat startup equity as a lottery ticket, not guaranteed compensation. If a startup offer shows "$200K total comp" with $120K in equity, your risk-adjusted comp might be closer to $100-130K.
Benefits: The Hidden Compensation
Benefits often add $15,000-60,000 in annual value. Don't ignore them.
Healthcare
The value of health insurance depends on your situation:
| Scenario | Approximate Annual Value |
|---|---|
| Single, healthy | $6,000-10,000 |
| Single, uses healthcare regularly | $10,000-15,000 |
| Family coverage | $18,000-30,000 |
| Family with specific healthcare needs | $25,000-45,000 |
What to compare: monthly premium cost to you, deductible amounts, out-of-pocket maximums, and whether your preferred doctors are in-network.
401(k) Match
401(k) matching is free money—don't leave it on the table.
| Match Structure | Annual Value (max contribution) |
|---|---|
| 100% of 6% | Up to $13,200 (at $220K base) |
| 50% of 6% | Up to $6,600 |
| 100% of 4% | Up to $8,800 |
| No match | $0 |
Calculate based on your actual expected contribution:
401k Value = Your Contribution × Match Rate (up to match cap)
Other Benefits
| Benefit | Typical Value |
|---|---|
| Unlimited PTO | Hard to value; depends on culture |
| Defined PTO (20+ days) | $5,000-15,000 |
| Remote work | $5,000-15,000 (commute savings) |
| Meals provided | $3,000-5,000 |
| Wellness stipend | $1,000-3,000 |
| Learning budget | $2,000-5,000 |
| Equipment stipend | $1,000-3,000 |
| Parental leave | Priceless when you need it |
Some benefits are hard to monetize but matter. Parental leave, mental health support, and flexibility are valuable even if they don't appear on a spreadsheet.
The Comparison Framework
Now put it all together.
Step 1: Create the Comparison Table
| Component | Company A | Company B |
|---|---|---|
| Base salary | ||
| Expected annual bonus | ||
| Signing bonus (amortized) | ||
| Equity (annual, risk-adjusted) | ||
| 401(k) match | ||
| Health insurance value | ||
| Other benefits | ||
| Total Annual Comp |
Step 2: Fill in the Numbers
Let's work through a real example:
Company A: Big Tech
- Base: $195,000
- Bonus: 15% target = $29,250
- Signing: $50,000 (amortized over 3 years = $16,667)
- RSUs: 800 over 4 years at $150 = $30,000/year
- 401(k): 100% of 6% = $11,700
- Healthcare: Family = $25,000
- Other: $3,000
Company B: Series B Startup
- Base: $175,000
- Bonus: 10% target = $17,500
- Signing: $30,000 (amortized = $10,000)
- Options: 80,000 options, $8M 409A, $2M paper value, risk-adjusted ~$600K = $150K over 4 years = $37,500/year (but this is highly speculative)
- 401(k): 50% of 6% = $5,250
- Healthcare: Family = $22,000
- Other: $2,000
| Component | Company A | Company B |
|---|---|---|
| Base | $195,000 | $175,000 |
| Bonus | $29,250 | $17,500 |
| Signing (amortized) | $16,667 | $10,000 |
| Equity (risk-adjusted) | $30,000 | $37,500* |
| 401(k) match | $11,700 | $5,250 |
| Healthcare | $25,000 | $22,000 |
| Other | $3,000 | $2,000 |
| Total | $310,617 | $269,250 |
*The startup equity number is speculative. At face value, the startup might claim $150K in annual equity value—but that's paper value with huge uncertainty.
Step 3: Apply Risk Weighting
Create a risk-adjusted comparison:
Guaranteed Annual Value = Base + (Signing ÷ Tenure)
Expected Variable = Bonus + Equity + Benefits
For Company A: $211,667 guaranteed + $98,950 expected = $310,617
For Company B: $185,000 guaranteed + $84,250 expected = $269,250
If you're risk-averse, weight guaranteed compensation more heavily.
Step 4: Consider Non-Financial Factors
After financials, consider:
| Factor | Company A | Company B |
|---|---|---|
| Career growth | Limited at BigCo | High if startup succeeds |
| Learning opportunity | Narrow but deep | Broad but chaotic |
| Work-life balance | Generally better | Probably worse |
| Job security | Higher | Lower |
| Upside potential | Capped | Uncapped |
Special Situations
Refreshers and Promotions
At big tech companies, equity refreshers are significant. Ask about typical annual refresher grants—they can add $20K-100K+ annually after year one.
| Company Type | Typical Refresher |
|---|---|
| FAANG | 50-100% of initial annual grant |
| Large tech | 25-75% of initial annual grant |
| Mid-size | 10-50% |
| Startup | Often none (initial grant is the deal) |
Factor expected refreshers into multi-year projections.
Equity Negotiation
Equity is often more negotiable than base salary. The leverage points:
| What to Ask | Typical Flexibility |
|---|---|
| More options/RSUs | 20-50% more |
| Lower strike price | Rarely moves |
| Accelerated vesting | Sometimes |
| Extended exercise window | Often |
| Refresher commitment | Sometimes |
The Golden Handcuffs Question
If you have unvested equity at your current company, factor that into your comparison.
True Cost of Leaving = Unvested Equity at Current Price
If you have $200K in unvested RSUs, a new offer needs to compensate for that loss—either through signing bonus, accelerated vesting, or enough upside to justify the forfeit.
The engineer who almost took the lower offer? Once we did the math properly—RSUs versus speculative options, benefits included, risk-adjusted—Company B was clearly better. She took B and, two years later, those RSUs are worth even more than we projected.
The numbers don't lie. But you have to calculate them correctly first.
References
[^1]: SmithSpektrum offer comparison data, 400+ analyses, 2020-2026. [^2]: Levels.fyi compensation data, 2025-2026. [^3]: Carta, "Startup Equity Outcomes," 2025. [^4]: Bureau of Labor Statistics, "Employer Costs for Employee Compensation," 2025.
Need help comparing offers? Contact SmithSpektrum for confidential offer analysis and negotiation support.
Author: Irvan Smith, Founder & Managing Director at SmithSpektrum