Chapter 01

How Companies Decide Your Salary

For most employees, the truth behind how companies make salary decisions is a mystery. Decided behind closed doors, with information only employers are privy to, and offered without explanation, comp offers can not only cause confusion for employees, but leave them in the dark when they try to negotiate their desired salary.

We’re here to change that. Understanding how your compensation is decided today will arm you for how to negotiate a job offer tomorrow.

So how do most companies land on a specific number to start (or end) the salary negotiation in most job offers? Typically, this process is determined by four main parts:

1. Compensation philosophy

A company’s compensation philosophy is generally a statement that guides the company’s position on employee compensation. Just as a mission statement guides the overall goals and vision for the company, a compensation philosophy guides HR and hiring managers in the compensation they offer to new hires (and any salary increases they offer current employees). A compensation philosophy usually aligns with the company’s other philosophies on work. If the business sets itself apart with a culture of top-tier employees, they generally match that strategy with compensation that beats their competition. 

Not all companies have a compensation philosophy. An early-stage start-up may not have a defined plan for compensation. But once a company is large enough, it needs a compensation philosophy to help streamline offers.

It’s important to know that a compensation philosophy can shift based on location. If a business allows remote work or has multiple offices across the nation or the globe, the framework for compensation likely shifts with cost of living and typical wages in the area. 

one key thing to note

A compensation philosophy is usually defined by a percentile. If the market typically pays $300 - $500k for a specific role and the philosophy determines that the company pays in the 50th percentile, a new hire may expect an offer right in the middle at $400k. 

2. Total compensation

The second key component companies use to determine a job offer is total compensation. This number includes the total cash an employee will receive, total equity offered, benefits, and any perks. Here’s a breakdown to get clear on what’s included in each category: 

Total cash:
This includes the base salary (what you’re paid every pay period), annual bonus (typically a percentage of your annual salary, usually paid out once per year), signing bonus (a cash bonus that’s determined at the time of signing an offer letter), and an on-target bonus (a cash bonus for quota-carrying roles determined by performance and might include accelerators for performance above 100% of goal). 

This includes the total ownership stake you receive in the company. Equity can be complex. When the company is post-IPO, equity immediately has value. If the company is pre-IPO, stock can be sold, but the process is complicated. If you have questions about the value of your pre-IPO stock, refer to Carta (see Equity 101 for more information).

This includes your health, dental, and vision insurance coverage. It can also include life insurance, parental benefits, and commuter subsidies. All of these have an assigned monetary value and are included in total compensation. 

This includes PTO, meal stipends, off-site trips, sabbaticals, and any other perks your company offers. Again, anything considered a perk likely has a monetary value attached to it and is included in your total compensation. 

one key thing to note

Total compensation is the way the company views your cost to the organization. While you might only view your compensation as the number in your paycheck, it’s important to know that the company sees a much higher dollar value for employing you.

3. Cost of labor

The third component that businesses use to determine compensation is cost of labor. Companies look at regional cost of labor data and determine how much they should spend on talent in each area where they employ people. New York City, San Francisco, and other areas that have many companies competing for the same talent drive the cost of labor higher. Other areas—such as Rio de Janeiro—that only have a few companies hiring and more available talent, drive prices for talent lower.

one key thing to note

Moving to a higher cost of living area doesn’t necessarily qualify you for a higher salary. With remote jobs and talent pools expanding beyond a traditional geographical location, cost of labor could be determined by where the company is headquartered, your location, the company’s philosophy on location-based comp, and more.

4. Market dynamics

The final piece of the compensation puzzle that employers use to determine an offer is market dynamics. Not surprisingly, companies place a premium or a discount on roles depending on the market dynamics at the time the role is offered. A good example is ML and AI Engineers. In the last few years (and likely the following years or possibly decade), companies are rushing to launch new AI products, creating high demand for ML and AI Engineers. Salaries for these roles are increasing as the demand rises and the talent pool remains the same. On the other side of the spectrum, individual contributor roles for customer support are increasingly pushed offshore, pushing salaries for those roles significantly lower.

one key thing to note

Get familiar with the market dynamics in your industry and for your role. If your line of work is in high demand, you have more negotiating power. And if the demand for your role is shrinking, consider ways to help you stand out—show your future employer how much value you really bring to the table.

Chapter 02

How the Cards Are Stacked Against You 

The fear and lack of information prevents most employees from negotiating salary or even submitting a counter offer.

  • 53% of employees
    Say they avoid salary negotiation because they don’t feel comfortable asking for more money.
  • 48% of employees
    Say they avoid salary negotiation because they are afraid the employer will decide to not hire them.
  • 38% of employees
    Say they avoid salary negotiation because they don’t want to look greedy to their new employer.

The reality of the compensation discussion is that the cards are stacked against you.

They’re stacked against you in three main ways:

1. Negotiating a job offer is an emotional experience.

Finding a job is an emotional experience. Finding a place where you feel valued, fit in with your team, and can take care of your monetary responsibilities is high stakes. It’s about where to spend your most valuable resource — your time — and making money to survive.

On the other hand, employers view their compensation strategy, your total comp, and the number of hires they need to reach their goals as the logistics of running a business. Businesses have the benefit of “groupthink” in every negotiation and every job offer. The bottom line for the employer is to make the best decision for the company (and that means getting the best hire at the best price). Decisions are typically not based on emotions; they’re simply decisions to help move the business forward.

2. Comp data available to employees is inaccurate.

When 45% of employees do make the decision to negotiate salary, they show up with data that simply isn’t accurate. Free online salary data websites don’t verify salary information and too many employees have reasons to inflate or under report their compensation (anonymity, pride, etc.). Data is often outdated and doesn’t offer any insight into comp philosophies, percentiles, geography, skill level, and more.

But for employers, there’s a billion dollar industry that helps companies figure out how much to pay each new hire. Why? Employees are the most expensive line item for every business and it’s critical those costs are cut in any way possible. This employer-only data shows comp bands for each role, helping the employer see how low they can go in a job offer. (Sometimes the low end of a band is $50,000 less than the high end.)

3. Employees lack comp negotiation experience.

For most employees, pay negotiation only happens a few times in their career when they decide to change jobs. And that shift in employment only happens a handful of times. The average employee changes jobs 5–7 times in their career. And only 30% of employees change jobs every 12 months.

Stack that against recruiters who are interacting with dozens of candidates per month. The balance of negotiating skills, information on salary, interviewing experience, and even salary negotiation scripts is wildly tipped toward the employer.

Interested in getting access to verified salary data to help you negotiate better pay? Join the waitlist for FairComp today.

Join the Waitlist
one key thing to note

Companies are going to make offers toward the lower-end of the band to get the best talent for the best price. And when they make the offer, they’re going to be better at negotiating because they have more reps, they pay for employer-only data, and they make unemotional decisions.

Don't Miss This Tip

Be Intentional When You Negotiate.

Once you complete the interview process (not during your first interview—we’re talking about at the end of all of your interviews) and the recruiter asks about your compensation, they likely want to hire you. And while you and the employer want to make this work, don’t forget that companies can rescind your offer at any time if something goes awry. Even though this is rare, it’s important that you are intentional with how you negotiate.

Chapter 03

Negotiating an Offer

When it’s time to negotiate an offer, it’s critical that you don’t show your cards too early. There’s a good chance that the recruiter will ask for your target salary range, but it’s imperative that you do not share a number. By offering up a number, you’ll pin yourself into a range that may be significantly lower than what the employer is willing to pay for your role.

Keep your target salary range to yourself. 
While it’s illegal in most states to ask about your salary range, businesses try to skirt this issue by asking for your target range. This conversation might look something like this (and here is a salary negotiation script to avoid the question): 


“Before we get too deep into the process, I would love to understand what you’re looking for. Would you mind sharing a target range of what you’re looking for in your next role?”

You (option 1)

“I'm looking for something that's competitive in the market. It's hard to access comp data for this role, so I don't currently have a range in mind."

You (option 2)

“It’s a bit too early to discuss compensation. I would love to learn more about the team, the role, and ensure mutual fit before talking about comp details.”

You (option 3)

“I’m so glad you asked. I’ve been meaning to ask you about the comp structure at the company. Can you walk me through the comp philosophy and what the comp structure looks like for this role and level?”


“Totally understand. Just want to make sure we don’t waste each others’ time if we’re not in the same ballpark.”


“I’m confident we’ll make something work for both parties if there’s a mutual fit.”
Don't Miss This Tip

Ask for the salary range early on if you’re interviewing for multiple roles at the same time.

If you’re interviewing for multiple roles at the same time and you don’t want to waste time, consider asking for the salary range early on in the process. If it’s lower than what you’re looking for (or willing to accept), save both you and the employer time by ending the conversation. But remember, recruiters are usually the least informed if there is variance, especially if it’s a new role. Our recommendation is to cast many lines; the more offers you receive, the more leverage you have.

Ask the right compensation questions.

Once you kick off the conversation about the offer, there are a few important questions to ask. These questions can help you be better prepared to review your offer:

  • What is the salary range for this role?
    In California, Colorado, and New York City, companies are required to disclose salary ranges, so you shouldn’t feel bad asking for it. Lead the conversation by asking about the company’s compensation philosophy so you can better understand how they think about total comp. A great example to think about—if the company doesn’t have an annual bonus percentage as part of their compensation expectations, you might expect a higher base salary.
  • What is the level for the role?

    Get clear on the requirements and level for the role . You might get higher pay at one level, but remember that higher levels come with a bigger set of expectations. And while it may be advantageous to get to the upper part of a band in a lower level, you might be better off starting at the low end of a higher band so you don’t cap your earning early on at the company. Some companies keep a level rubric that specifically outlines the expectations of each level and the next level up. If you can get access to this information, you can position yourself for the appropriate level (according to your skills and experience).
  • Are you offering RSUs (restricted stock units)?

    If your offer includes RSUs, you’re in luck. RSUs are far less complicated than ISOs. Find out how many shares you will be granted and the value of those shares. For example, if the company is offering $300,000 in RSUs and they tell you that equals 75,000 shares, the current share value is $4. This price can go up or down with fundraising or a liquidation event. Regardless, the equity offer is $300,000 today and that’s your starting point for negotiation. The way RSUs are valued varies by company. Most private companies value their RSUs on the previous fundraising round’s preferred price. Public companies typically value their RSus on the value at the time the grant was approved. Others implement a 30-day trailing average of the stock price to help prevent any insider knowledge impacting the sale of RSUs.
  • Are you offering ISOs (incentive stock options)?

    If the employer is offering ISOs, things can get a bit more complicated. When you are granted ISOs, you have the option to purchase (known as exercising) ISOs at a lower price (known as the strike price or 409a value) than what investors are paying for them today. If ISOs are part of your offer, ask what the strike price is (the 409a value) and the preferred price (the value of the shares based on the most recent valuation—this is what investors paid for the company most recently). This strategy can help you value your shares. A good example to consider is a strike price of $0.50 and a preferred price of $2.00 with 100,000 shares. With these numbers, you have the option to exercise them for $50,000 and sell them for $200,000 during a liquidation event or if you have the option to sell them in a secondary market. In this example, the inherent value of your ISOs is $150,000 (you can find this number by subtracting the strike price from the preferred price).
  • What was the company’s most recent valuation?
    Consider asking what the company is currently valued at/about the current profit margins. Even in cases where it isn’t verifiable, it can help you make a decision about whether the company has longevity and is worth your time joining.
  • What is the vesting schedule for any equity that is granted as part of my offer?
    What is the post termination exercise window? When you receive equity as part of your offer, it isn’t all instantly available to you (even if it’s instantly worth something with public shares). Most companies employ a vesting schedule to incentivize longevity from each employee that receives equity. A common vesting schedule is 4 years with 25% of the equity vesting each year. If you have ISOs, you’re also going to want to know how long you have to exercise those shares. For most companies, it’s 90 days after you leave the company. Exercising ISOs can be expensive, so make sure you factor this cost in if you’re joining a pre-IPO company.
  • Is there an equity refresh program?
    An equity refresh program allows existing employees to receive additional equity as a reward and/or recognition of good work. With this option, you can have an opportunity to earn more equity as you prove your value.

Key Note:
We are NOT financial advisors and the information in this asset is not financial advice. Consult with your financial advisor to learn more about how to treat your equity. For more information about your stock options, feel free to visit this link.

Don't Miss This Tip

Don’t react when you receive the initial offer.

When you finally receive an offer, show excitement about the opportunity and the team. Don’t offer any other reaction to the offer. Politely request a few days to review the offer so you can prepare your negotiation.

Be prepared when you ask for a higher compensation.
As you prepare to negotiate your offer for a higher salary (or a bump in the signing bonus, PTO, equity, etc.), there are a few major things to consider.

First, what are the requirements of the role? Get specific as you prepare to show how you meet those requirements at an advanced level. If the company is looking for 3 years of experience and you have 6, you’re qualified to earn towards the top of the band. Think through all of the other possible examples you can share that show you’re operating above the “median” for the role to make your case.

Second, how much more can you ask for? There are two styles of negotiation that experienced employees use when they ask for a higher comp.

Last, consider salary negotiation scripts and salary negotiation email examples to help you prepare your talk track.

Negotiation Style 1: Anchor High
It can be smart to ask for 10 - 20% above the number you are shooting for with this new offer. The recruiter is likely to counter offer with something lower (often claiming that they have reached the “max” they can offer). But if you’ve gone 10 - 20% higher than your target number, you’re more likely to get an offer than matches your expectations, even with a counter offer. If you’re looking for $100k and you share that upfront, your offer will likely come in at $90k. Instead, start the conversation at $120k and your chances of hitting $100k increase.

Negotiation Style 2: Best and Final
With this negotiation tactic, make a clear argument for what you want and then make it clear that you’ll take nothing less (but be polite—don’t forget that an employer can rescind an offer if something feels off, even in the stage of the hiring process). Consider a statement like this: “I don’t want to go back and forth. I want to work here, but given my experience, the requirements for the role, and what other companies are talking to me about, I want $100k in base salary and I’ll sign today.”

Third, consider other creative ways to earn more. Your total compensation isn’t just about salary. Some companies are more flexible with equity, bonuses, and other areas of comp. If you’ve already asked about the salary range and the compensation philosophy prevents the recruiter from going higher on salary, ask for equity, a higher annual bonus, or a sign-on bonus.

Interested in getting access to verified salary data to help you negotiate better pay? Join the waitlist for FairComp today.

Don't Miss This Tip

Be direct, kind, and communicative.

Don’t forget that you’re still interviewing for this role, even when you’re in the final phase of salary negotiations.

→ Always be appreciative of the recruiter’s time and the opportunity you’ve been given to be considered for the role.

→ Share how excited you are for the role.

→ Be direct when you are negotiating the offer and asking for more.

→ Email the recruiter to recap your conversation to ensure it’s in writing.

Don't Miss This Tip

You can leverage competing offers, but proceed with caution.

Some employees use competing offers as leverage to get a higher total compensation offer. While this might work in some cases (it can be very beneficial to be honest that you’re interviewing at multiple companies and have a few offers in hand), it can backfire if you lie or do it at the wrong time. Instead of bringing up your competing offers after you’ve received your initial offer, be clear from the beginning with the recruiter that you’re in the interview process with multiple companies. Then, after you receive the initial offer, you can share any competing offers to help with your negotiation (but you won’t be blindsiding your potential employer with new information at the last stage of the process).

Chapter 04

Earning More During Review Cycles

Annual performance reviews are a typical part of the employee experience. Many companies set aside specific budget to give employees a percentage increase each year. In these cases, there’s an extensive process that HR and leaders follow to determine how to allocate the budget for raises.

For most companies, following a rating strategy is effective and efficient. Every employee is assigned a rating and with that, a percentage increase.

Annual Performance Review Rating Example:

Rating 1

Underperforming - No increase and likely a PIP or termination.

Rating 2

Meets expectations - 3% increase

Rating 3

Exceeds expectations - 5% increase

Rating 4

Exceptional - 7% increase

To help leaders budget properly, a predetermined distribution of ratings is often established across each team.

Predetermined Distribution of Ratings Across Each Team Example:

Rating 1

Underperforming - No increase and likely a PIP or termination. <40% of the team

Rating 2

Meets expectations - 3% increase
40% of the team

Rating 3

Exceeds expectations - 7% increase
15% of the team

Rating 4

Exceptional - 10% increase
Top 5% of the team

While everyone obviously wants to stand out and earn an exceptional rating, getting to the top 5% of your team can be challenging. Most companies collaborate with HR and calibrate scores across departments. The review process can be delicate. It generally starts with managers making recommendations for their teams (assigning a specific rating to each employee) and then the calibration process begins.

Directors meet with their managers to review and debate on who should earn what rating. Each director will make cases for their top performers since most managers want to give their best employee(s) an exceptional rating (and a raise). If there are 30 managers on a team of 200, there could be 30 employees deserving of an exceptional rating, but only 10 of those 30 will actually receive the high rating because of forced distribution and budgeting constraints.

So how do you set yourself up to get the best possible rating? It’s a process that can’t just be considered or followed through on during annual performance reviews. Consider the following tips to increase your chances of a higher rating:

How to Increase Your Chances of a Higher Annual Review Rating:

  • Exceed Your Goals

    This might be obvious, but it’s an important first step to getting the top stop on the team. Hit and exceed your goals! And if you don’t have specific goals, that’s a good place to start. Set goals with your manager and show your progress throughout the year. There’s simply no substitute for delivering results. (Pro tip: always connect your goals to the company’s goals. If you’re winning, the company should be winning—making it easier to show your value to the company.)
  • Encourage Regular Feedback with Key People

    Implement regular feedback loops with your managers, your peers, and your org or department leader. If you’re a manager, implement the same strategy for your direct reports (feedback from your employees is just as critical). 360 evaluations are a common annual performance review process, especially in cross-functional teams. And while you might have a great operating rhythm with your manager, you don’t want a poor situation with your peers or org leader to put you at risk and impact your rating. Keep in contact with the people that will have a say in how you’re performing.
  • Get Clear on Where You Stand with Your Manager (all the time)

    Don’t wait to be surprised about feedback from your manager. Adopt the mantra that you always know where you stand with your leader. Encourage and solicit feedback on a monthly cadence. Codify the feedback in writing to ensure you heard correctly and are aligned. Constructive feedback can help you understand your gaps and know which areas you need to improve.
  • Create a “Highlight Reel” with Your Accomplishments

    Build a system for yourself where you collect and organize key accomplishments. This “highlight reel” is key to helping your manager (and others) remember your impact and your performance at the company. You can’t expect your manager to worry about the team of 10+ employees and recall every accomplishment or goal achieved specifically by you. Make it easy for them (and you) by recording accomplishments, collecting positive feedback, and more in your “highlight reel.” Add to your “highlight reel” every 1–2 weeks.
  • Share Highlights of Your “Highlight Reel” with Your Manager Before Your Annual Review
    Once you have your “highlight reel” process in place, share the highlights with your manager before annual reviews kick off. This conversation will make it easier for your manager to assign a rating (and make a case for that rating). It should safeguard against the possibility that your manager will forget some of your accomplishments. (Pro tip: after your conversation with your manager, share the highlights in an email so it’s easy for them to pull up and reference later.)

While all of this advice can help you earn a higher spot on the team, it’s important to remember that results are important, feedback is important, and operating norms are important.

Results →
Your annual review will likely include both a quantitative part of the review. This is where your results can speak for themselves (especially if you’ve gathered your highlights and shared them with your manager).

Feedback →
Every company’s culture is different, but most companies have shared values and beliefs that employees are expected to follow. Feedback from other employees (and your manager) might rely heavily on how you talk about work, how you approach work, and what it’s like to work with you.

Operating norms →
The qualitative part of the review will also include how well you conform to the operating norms of the business. If you have great results, but go against the grain of the culture, you’re not going to be happy with your annual review.

To increase your chances of getting the best rating and review, you need to excel in all three areas—results, feedback, and operating norms.

Chapter 05

The Risks of Not Submitting a Counter Offer

More than 50% of employees say they don’t negotiate for a higher salary when offered a new position. We’ve covered the reasons why—fear, poor experience negotiating, concerns that the employer will rescind the offer, worries that the employer will view them as greedy, etc.

More than 50% of employees say they don’t negotiate for a higher salary when offered a new position. We’ve covered the reasons why—fear, poor experience negotiating, concerns that the employer will rescind the offer, worries that the employer will view them as greedy, etc.

Research shows that only 30% of U.S. employees tried to negotiate a higher salary in their last job offer.

It’s clear that most people simply aren't comfortable negotiating their salary. When you don’t attempt to negotiate, you leave money on the table.

But here’s the good news. Employers are willing to negotiate. In fact, 75% of employers say they are willing to negotiate salary on an initial job offer. And other data suggests that 85% of employees who ask for an increase in salary receive at least some of what they ask for.

Don’t let the perceived risks of negotiation prevent you from earning what you’re worth. The risks of not asking may be far greater.

You’re leaving money on the table.
Without any negotiation, you simply don’t know what higher salary you might be leaving on the table. Total compensation ranges can have variance in the six figures. Without verified salary data and a clear understanding of your role’s level and the comp philosophy, you could be walking away from a serious jump in salary.

You’re creating a large downstream impact.
If you don’t attempt a negotiation, you’re setting yourself up with a salary baseline that will impact your future earnings. Most businesses anchor annual raises to your starting salary. If that starting point is low, you’re compounding much less than you would if you had attempted a negotiation with your initial offer.

Negotiating a Raise at Your Current Company

The only real risks of asking for a raise at your current company are tied to your delivery (and your performance). Here are some crucial scenarios to consider before you ask:

  • Review cycles just concluded
    Review cycles just concluded
If the company just finished the review cycle and you didn’t get a raise, it’s not time to ask for one—it’s time to find out why you didn’t receive one in the first place. It’s very possible that the company only provided raises to eligible employees (e.g. employees that hit their goals, were rated highly based on 360 reviews, or those that have been there for at least 12 calendar months). If you ask for a raise in this scenario, you will likely sound tone-deaf, lacking serious self awareness.
  • Performance or behavior related conversations are ongoing

    If you’re in the hot seat for an issue that hasn’t passed yet, you definitely shouldn’t be asking for a raise. Review your conversations with your manager (and you should be having those regularly) and make sure you know where you stand before you go barging into a 1:1 asking for more compensation for work that doesn’t align with higher pay.
  • Your promotion is brand new
    If you just got promoted (and you were also compensated for a higher title and more responsibility), you need to give it some time. If you ask for more now, you will come off as greedy (and tone-deaf again, like scenario 1).
Don't Miss This Tip

How a Low Starting Salary Impacts You in the Long Run.

If you accept an initial offer of $200k (with no negotiation, potentially walking away from $40k - $50k more) and you receive a 6% annual raise, you can expect $358k in 10 years. If you had negotiated up to $250k with an 8% annual raise, you’d see $540k as your total comp in the same amount of time.

Chapter 06

When It’s Time to Find Something New

How do you know when it’s time to move on and find something new? First, you need to get clear about what you don’t have in your current role and what you’re seeking.

Consider the following questions:

  • Do you want to make more money?
  • Are you learning & growing?
  • Have you lost faith in your company’s mission?
  • Do you want or need a bigger challenge?
  • Has the culture at your current employer changed or turned toxic?

If you’re looking for something new based purely on financial reasons, there are few more questions to consider:

  1. Are you capped in your current role? 

    If you haven’t had a conversation about your compensation with your manager, it’s time to schedule one. Start here before you start looking for something different. When you ask about banding for your current role and you’re prepping to ask for a raise, bring in hard facts about the value you’ve brought to the company (updated processes that have saved the team time, new customers, beating quota, etc.). Don’t ask for a raise without sharing why you deserve it (through all of the ways you’re helping the company achieve the overall mission and make more money).
  2. Can you earn more in a different role at the same company? 

    If you love the company, but you are limited financially in your current role, consider talking to your manager about other options within the business. Open up the conversation with HR and look at the open roles available.
  3. Is the market paying at a higher level than what your current rate is today?
    For many employees, hopping to another company for the same role is a faster way to earn a higher paycheck. Compensation philosophies vary by company (some pay at the lower percentile while others pay at the top range of the percentile). Get clear on your company’s comp philosophy and the band for your role so you have a good understanding of how far you can grow (or how little room you have to grow).
Chapter 07

The new way—using verified compensation data to get paid fairly.

Negotiating pay is scary. Employees have limited information, limited experience, and a lot on the line. It’s a black box. Companies have unlimited resources: data, compensation experts, recruiters, and thousands of repetitions. They have nothing to lose and everything needed to win.

At FairComp, our mission is to level the playing field and help people get paid more.

That’s why we’re building the only verified source of pay information, by employees, for employees.

You shouldn’t have to wonder if you’re being paid fairly.