Before diving into how to negotiate a tech offer, it’s important to understand why you should negotiate. The top tier of the tech industry can pay exceptionally well. This group of companies if often referred to as FAANG, which stands for Facebook, Apple, Amazon, Netflix and Google (though it certainly captures a much wider set of companies than just those 5). A FAANG salary for a mid-level software engineering position can clear $500,000 in 2022. However, it’s also possible for the same role to pay $300,000, which is a $200,000 yearly gap. On a 4-year offer this means you are making $800,000 less than you could be for working at the same company, role, level, and location. This is why offer negotiation is so important in the tech industries and there are lots of great resources like the one linked above to help you understand this complex process.
To start, it’s impossible to negotiate compensation without understanding your target number. But this of course can’t just be derived based on how much you would “like to earn”. You need to deeply understand the compensation structures at each company and also the compensation bands associated with each component. Now, you might be asking what the components are. Standard tech offers are comprised of base salary, a performance bonus that often comes as a % of that base salary, equity grants that typically vest over 4 years, and signing bonuses. Each of these has different ranges that differ based on 4 core factors: company, role, level, and location. For example, an E5 Software Engineer at Facebook in the Bay Area has a signing bonus range of $0-$100,000, but if you change any one of those components, then the compensation range changes. You need to get these numbers right to determine your compensation target before you start the negotiation.
Once you know your target number, the next step is to plan a strategy that will ensure you get there. People often come up with highly ineffective ways to justify their compensation requests. For example, it does not help to say you want $500,000 because your friend received an offer for that amount or because you saw that amount posted anonymously online. If that worked, I think we would all be posting higher anonymous numbers online. Perhaps more surprisingly, it’s also not effective to justify an increase based on how good you will be at the job. Instead, companies respond to credible competitive pressure. What they are most worried about is you not accepting the offer. If your only option is to continue working at the same job that you were employed at when you start interviewing with them, then the company in question can be fairly confident that you would rather work for them (otherwise why did you bother interviewing). Companies that are confident you will accept their offer, do not give large increases during negotiations. Instead, you need to create a strategy that optimally leverages even early-stage interviews or discussions you’ve had with other companies to instill an element of fear into your top choice company. Now to be clear, this is a careful line to thread and all your conversations with your top choice company should still convey your enthusiasm and excitement, but slight disappointment on the compensation front.
Unfortunately, the right numbers and a good high-level strategy isn’t enough to ensure a successful negotiation. Many companies are large bureaucracies and there is a set of negotiation rules that recruiters are unable to break. For example, if you bring Facebook a competing offer from Instacart, they will discount the equity value by 25% because it’s a private company. All of a sudden, your higher competing offer which was near perfect leverage doesn’t work. This set of rules is not publicly available but has been identified by companies like Moonchaser that have negotiated hundreds and hundreds of offers with these tech companies. If you know this information in advance, you can adapt your strategy to ensure you don’t leave money on the negotiation table.
So, to summarize, you need to understand compensation structures and targets, create an empirically backed negotiation strategy, and follow the company-specific rules to ensure you maximize your compensation. If you are confident in doing that, it might be worth getting help given this is one of the largest financial decisions of your life.