I have talked about how to be the captain of your career, and how to leverage your network through mentoring and LinkedIn. But what is this all for? Why is it important to manage your career? Why should you seek career advancement? You might find what you do very interesting, very engaging, very fulfilling. But chances are, dear reader, that you have to work for a living. And if you are a women in the US STEM industry, you are already starting with a disadvantage. Career advancement, and de facto career management, are the most likely way to empower women’s economic and sociologic well-being.
Young and younger women in Software Engineering, hear hear! Let’s talk about money! There is often a sense of taboo in both North America and Europe when talking about money. But not today! Today, let’s dive into how to estimate your market value, how to understand your total compensation, and get a raise 💰 💰 💰 💰 💰!
Know Your Worth
There are many different factors that affect your market worth positively or negatively. I cover a few below, and there may be more depending on your particular situation.
Area of expertise
Your area of expertise, and the ratio of supply and demand for that expertise is a crucial factor in considering your market value. A career is not a monolith, especially in software engineering and associated niches like Machine Learning. Technology evolves and you must evolve with it. Being the captain of your own career means paying attention for the skills you have and the skills you need/want to maintain your relevance to the market. Resilient career paths are often those who learned to negotiate tight turns and branching into other areas. Ask your mentors and your network what their paths were. In my own experience, I started with a Bachelor in Economics, and now I am doing AI security, which didn’t even exist as a field when I was in college.
Years and Quality of Experience
The number of years of experience is necessary but not sufficient when estimating your market value. Consider also the quality of those years, what your responsibilities and achievements were. One more year of doing the same thing may be less valuable than one year doing something more difficult. It also depends on how you talk about your years of experience (see “Pimp Youself Out” section below).
Credentials
While the type of credentials (college degree, certification, etc.) does matter initially in your compensation expectation, that impact is marginally decreasing over time. That means that right after you obtain a credential, it may have a lot of impact on your market worth. As time goes, that impact will be lessen, and essentially be replaced by years of experience.
Type of Company
Compensation packages will look differently if the company is public or private, a stealth start-up or a large corporation. A public company is likely to have easily liquefiable equity, while a start-up will try to make you work for monopoly money. I heavily develop on the total compensation structure in the next section.
Your Location
High cost-of-living (HCOL) areas such as San Francisco or New York City naturally have higher compensation brackets. A positive by-product of this on-going pandemic is the expansion of remote work. But in the US, taxation of labor depends where the labor is done, and therefore companies have been adjusting their brackets of compensation based your cost-of-living. Thus, at least in the US, your market value will also depend on your location.
Pimp Yourself Out
Similarly to writing your annual performance review, be your best advocate. Your resume does not speak for itself, and you need to sell yourself to your current or future employer. Your resume might have gaps, or experiences that seem irrelevant to the role. How you talk about your experiences (and draw the relevance if it is not obvious), skills, and competences is the most important part of constructing your market value estimation, and defend it.
I graduated from my PhD program in 2019, so I technically only have 5 years of experience at the time of writing this post. Yet, I am already at a very senior level. It is not because I am some sort of super productive genius. It is because I demonstrate that my years in Graduate School are part of my 15-year experience in ML. It may seem unusual to count Graduate School as part of years of experience, and often recruiters question this. I defend my point by explaining that I was employed by the University, I worked in the Office of the CIO where I produced and presented quarterly reports to the CIO. These reports were used in decisions that involved millions of dollars of investment for the University, as well as sensitive data regarding student performance. So I have professional experience working with quantitative analysis, Data Governance and regulations, and delivering in high impact environments. And so on… To know one’s worth is to understand how your experience, skills, and competences can map beyond the one role you had. Only you can do that for yourself.
Total Compensation Structure
Disclamer: I am not your lawyer or your financial advisor. The goal of this section is only to describe a few concepts. Those concepts happen to have crucial tax implications, so please, do your own homework!
In the American Software Engineering industry, the total compensation is usually divided in three parts: the base pay (your salary), the bonus (usually once a year), the equity (i.e., stocks, RSU). The repartition of value between these three parts will make an enormous difference in your long term wealth. Additionally, the benefits (i.e., 401k, 401k match, ESPP, health insurance, etc.) are also part of the total compensation. Let’s break it down :nerd:.
Base Pay
The base pay is the pre-tax amount you get every two weeks. That money is 100% in your hand, invariable, and contractually guaranteed. When interviewing for a new role, don’t forget to ask if the base pay is subject to cost of living adjustment every year, and how often one might expect a raise. The main reason that drove my decision to leave Credit Suisse was that they never gave raises. Remember that you lose money to inflation every time a raise doesn’t equal the inflation rate.
Equity
To put it simply, the equity is what you own of the company. The company uses equity as a long term incentive for you to invest your time and energy toward the long term performance of the company. The value of equity depends wildly on the type of equity (e.g., RSU, Stock Options, or whatever OpenAI does) and whether the company is public or private. It’s all about how liquefiable the equity is. Can you sell it? Once it is vested, can you sell it when you want or do you have to wait for an hypothetical liquidation event? Do you have to exercise it first, then sell it? Even when you can sell it, there are significant tax consequences with these processes. It is worth consulting with a CPA when considering an equity offer to understand the post-tax value of an equity grant.
A start-up may use equity to bump a lower base pay to mitigate cash flow issues. This equity is monopoly money until or (more unlikely) if the company reaches IPO. Or you can do what OpenAI does, which I call Schrödinger monopoly money since the liquidation events are random.
Even when your equity is liquefiable, it carries a lot of variation. Between the moment I started at Okta, and when my RSU vested, Okta’s stock lost 85% of its value. I negotiated heavily on base pay, so my total compensation only decreased by 14%. Others were not so lucky.
Overall, equity may be a very variable and uncertain part of your total compensation. You have to decide for yourself what is your risk tolerance. There is a lot more to learn about equity, so I strongly recommend perusing the Practical Engineer deep-dive.
Bonus
Your company may offer a cash bonus based on performance. It is often expressed in percentage of base pay (which is why it is important to negotiate your base pay as high as possible :). Some start-ups may offer you an equity bonus instead of cash. It is on you to assess the value of monopoly money…
When interviewing for a new role, ask what is the ratio used to calculate the bonus, in terms of personal performance vs company financial performance. Most companies will calculate the bonus on a 50/50 ratio. Fifty percent of your bonus depends on your performance and fifty percent depends on the company financial performance. This is the trick they use to reduce your bonus as much as possible. Companies will often set very high or unattainable benchmarks of company results to determine your bonus. When the bonus season comes, you may be disappointed. In my career, I never received the full bonus, because the company always claimed that it didn’t reach their financial goals.
Benefits
Companies may offer an array of benefits which will impact your short and long-term financial well-being. When comparing offers, compare their benefits as well! Benefits can be:
- Health insurance
- Vacation days
- 401k
- 401k matching
- ESPP
- Internet/Mobile reimbursement
- Commuter benefit program
- Continued education funding
Remote Work
The ability of working remotely is an enormous benefit that you should consider in your total compensation. Before the start of the COVID-19 pandemic, I commuted two and half hours every day by train and subway. It cost me $5000/year (But thanks to the commuter benefit limit in 2021, $3240 of those dollars were tax-free… yay…?), and cumulated to the equivalent of 26 days (2.5hr5days50weeks/24hours) of time spent in transport. Switching to remote saved me $5000, and gave me nearly a month worth of time back every year.
Life must be lived, not commuted. 🚎
How to Compare Offers
Consider also comparing offers over time. Given the diversity of total compensation packages, vesting periods, expected and variable compensation, it may be better to compare total compensation packages over a period of 4 years. When I want to compare offers, I make a spreadsheet of all the parts of the total compensation that have a dollar amount, and I project over the next 4 years.
When I was comparing the offer to join Okta and the counter-offer from Credit Suisse, Credit Suisse was more money upfront. If you projected Okta’s offer over 4 years, Okta’s offer was better in the long run (Even with the 80% loss on RSU 😆)
What the Market Says
Once you assemble all of the elements of your market worth, take a look at what the market says. Software Engineers are always making apps to solve their problem, and salary transparency is no exception. Use Level.fyi and Blind to get a sense of how the elements of your market worth map to total compensation. However, I did not find GlassDoor, Indeed, or even Google AI Overview to be particularly accurate.
What Your Network Says
Your network can also be a source of information. In the USA, it is a worker’s protected right to discuss pay with other workers. Asymmetry of information is what drives salary compression, so do it! Talk about it! Ask your mentors what they think you should be making. If you don’t want to ask your current colleagues,ask your colleague who is moving on to the next role what their base pay was, or will be. And so on.
What your employer says
Do not trust your employer’s evaluation of your market worth. Economic theory dictates that for-profit companies aim to employ workers for the lowest pay the workforce will accept. Companies will always claim that they pay “market rate”, and try to minimize that number. Thus, do not trust it. 💸
Who Wants to Be a Millionaire
I have written before about how to justify a raise to your employer, but statistically, you are more likely to see a significant wage gain by changing jobs. A lot of digital ink has been spent on the pros and cons of job-hopping. You are the Captain of your own career, it is for you to decide.
I have one more piece of advice, which I didn’t know where else to put. So here is a last minute nugget. If you decide to switch job and seek a higher compensation, talk about total compensation during the first call with the recruiter. The reason for starting the total compensation conversation early is because software engineering roles often require technical interviews. Don’t waste your time and energy on an interview process if the role doesn’t even pay what you want!
First, ask the recruiter about the compensation structure. Does the company offer equity and/or bonuses? Are there benefit programs such as 401k match or ESPP?. Then, ask what is the base pay/equity range for this position. If they don’t want to give you a range (🚩), don’t give your estimated market value! Instead, confirm with them that your range is within the budget of this role. Your range is at least your market value plus a few tens of thousands of dollars more. If your market value is $100k, then your range could be $100k-$125k.
While your starting salary correlates with your lifetime earnings, it doesn’t have to cause it!