Career Negotiations Podcast

What is Total Compensation – Why You Should Use a Total Compensation Calculator

• Brandon Bramley

Share episode

Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.

0:00 | 8:48

Do you know what total compensation is? Most people think they understand how much a job pays, but they’re only looking at the base salary — not the full compensation package.

In this episode, I’ll explain what total compensation actually is and how it differs from base salary, so you understand why focusing on base pay alone can be misleading. That way you’ll know how to calculate total compensation accurately in your current role or your next job offer.

TOTAL COMPENSATION TOOLS MENTIONED

SALARY NEGOTIATION RESOURCES

Like and subscribe!

CONNECT WITH ME

WHO AM I

I'm Brandon, the Founder and Lead Negotiator at The Salary Negotiator®. As a former corporate negotiator, I now help employees increase their compensation. Through hundreds of salary negotiations, I've helped career professionals secure over $200 million in additional compensation. My expertise is backed by more than 150 five-star reviews from career professionals on Google and Trustpilot.

Why Base Salary Misleads

Brandon

Most people think they understand how much a job pays, but typically they're only looking at the base salary and not what the total compensation is. In this episode, my goal is to break down everything you need to understand and correctly calculate total compensation. First, I'm going to explain what total compensation actually is and how it differs from your base salary so you understand why focusing on your base pay alone can be very misleading. Then I'm going to walk you through the main components that make up your total compensation, including your base salary, your bonuses, your equity, and sign-up bonuses, and how each one should be evaluated. Finally, I'll show you how to use a total compensation calculator to add everything up correctly. And I'm going to explain why perks and benefits shouldn't really be included in your total compensation calculation when you're evaluating a new job offer. By the end of this video, you'll know exactly how to calculate total compensation and confidently evaluate a job offer. So let's get into it. Hey everyone, welcome back to the channel. If you're new here, my name is Brandon Bramley and I'm the founder and lead negotiator at thesalarynegotiator.com. I provide professional job offer negotiation coaching, salary negotiation courses, and tools to help professionals like you navigate the negotiation process and secure competitive compensation. I'm not just a career coach or recruiter giving out generic salary negotiation advice. There's already a ton of bad advice floating around online. Instead, I've personally led hundreds of salary negotiations across various roles, helping my clients secure hundreds of millions more in compensation. So my background is actually in strategic negotiations, and my goal is to debunk the bad advice out there and give you proven negotiation strategies that are actually going to work and help you earn more. So if you're a career professional looking to earn competitive pay, subscribe here for actionable tips. And when you're ready to take your negotiations to the next level, visit thesanegotiator.com for coaching courses and tools that are designed to help you negotiate the best possible offer. Now, it's really important to understand the difference between your base salary and total compensation. Way too many people focus on only the base salary for a role, but that's really just one piece of the puzzle when it comes to your pay at most companies. So when you're evaluating your current pay or new job offer, you need to look at the full picture, which is your total monetary take-home pay, also known as your total compensation. This is included going to include your base salary, your bonuses, the value of any equity that bests every year, and any sign up bonuses. A simple way to think about it is gonna be what goes towards the total compensation is this. If you pay taxes on it at the end of the year, it's likely part of your total compensation. Understanding your total compensation is very important because it allows you to calculate your true annual income. Accurately compare offers across companies when you're changing roles and conduct accurate compensation research. So when you understand the full picture of how you're being paid, you're gonna be in a much stronger position to negotiate a competitive offer in the future and know exactly how much you're bringing home at the end of the year. Okay, so let's talk about the components that actually make up your total compensation in a little bit more detail. Because in most job offers or at your current company, you're typically gonna see four core compensation components. The first one is gonna be your base salary, right? This is your standard fixed guaranteed pay in exchange for the work you do. It's usually gonna be paid out bi-weekly or on a monthly paycheck, and it's not gonna include any benefits, bonuses, or equity. And because it's a set rate, base salary typically only changes through promotions or merit increases. And I really don't want to spend that much time here since this should be the one that you're all familiar with that you receive in every salaried role. But the second item that's as part of your compensation or might be in total compensation is gonna be a performance bonus. Bonuses are tied to individual, team, or company performance, and they're not always guaranteed. If offered, they're usually paid out at the end of a period, such as every quarter or annually, and they're either gonna be in a fixed dollar amount or a percentage of your base salary. And the actual payout is gonna really depend based off of those performance results. The third item you might receive in your total compensation is gonna be an equity incentive, which usually comes in the form of restricted stock units called RSUs or employee stock options. RSUs are gonna represent actual company stock that you receive once at VEST. Stock options, though, give you the right to purchase a company stock at a predetermined price, meaning that you're actually gonna have to exercise or pay for the options to receive those shares instead of getting them just granted to you like RSUs. And the big thing to highlight about equity compensation is it is gonna have a stock vesting schedule, which essentially determines when you actually receive ownership of the shares or the options. So most stock vesting schedules are gonna last three to four years with the equity vesting and increments over that time. Some companies are gonna have an even vesting schedule while other companies are gonna use a staggered approach. So, for example, to help highlight this, Meta actually uses a four-year vesting schedule where 25% of the RCUs vest each year. On the other hand, you'll see at Amazon there's a staggered schedule where 5% is gonna vest at the end of year one, 15% at the end of year two, 40% in year three, and the remaining 40% in your final year. So every company is gonna have their own stock vesting structure. So you're gonna want to make sure you understand that when you're valuing your equity. It's also very important to remember that you do not receive the full value of the equity up front. Okay, so the value of this actual equity is gonna fluctuate over time based on the company's stock price. So if the stock price increases, the value of your equity increases, but if it decreases, your equity is gonna go down as well. There's also risk involved since any unvested equity is forfeit if you do decide to leave the company before it fully vests. So keep that in mind. The final item in total compensation is gonna be a sign on bonus. Okay, so these are typically one-time cash payments, often paid out within the first 30 days of starting a role. Sign-on bonuses are commonly used to offset any compensation you might be leaving behind at your previous employer or just as an incentive to get you to join. So most sign-up bonuses include repayment clauses though, meaning that you might have to actually pay it back if you end up leaving within a turn sign period, such as leaving after your first year or before the end of your first year. The last item I'll share is that you might see at some companies that offer equity that there might be an annual stock refresh, which is essentially additional employee stock grants given each year. However, because these restock refreshes aren't guaranteed and can vary widely across roles and companies, I typically don't include them in our total compensation calculations, but it's a good idea to be aware of them if they do help you grow your total comp from year to year. Okay, so to calculate your total compensation, you're gonna want to take all the components we just covered and outline them each in a simple table. All right, so this is gonna give you a clear visual of your estimated total compensation, and it's especially helpful if your offer includes equity since it'll actually allow you to see how your compensation might play out over multiple years and how it's split. The other thing is to actually make this easier for you, I actually have a free total compensation calculator on our site. You can actually input your base salary, your bonus, your equity, and your sign-on bonus into the total compensation calculator, and it's actually going to show you your estimated compensation over the vesting period, both on an annual basis and in total. So you can actually find this total compensation calculator at thesalarynegotiator.com, and I'll make sure I actually link to it in the episode notes below so you can easily calculate your total compensation. Now, one thing I want to call out is you might have noticed that this list of total compensation components doesn't actually include benefits and your perks that you might receive in your compensation package. So, such as relocation assistance, health insurance, pay time off, or retirement benefits. Okay, so those are very important to you and they do have a monetary value when changing roles or reviewing your current package. But I intentionally don't include those benefits in total compensation because the focus is on your total take-home income. Okay, so using your take home pay as a baseline makes it much easier to accurately actually compare against offer. And actually, if you are gonna go through the salary negotiation process, negotiate the monetary portion of your compensation. But as I mentioned, if those benefits are important to you, you should absolutely evaluate their values separately. Just keep in mind that typically when you're actually researching compensation and comparing offers, those items aren't necessarily included in the core total compensation calculation when you're comparing that across companies. Well, that wraps up this episode on total compensation and why using a total compensation calculator is so important. So hopefully this breakdown gave you a clear understanding of what's actually included in total compensation and why focusing on your full package and not just your base salary will help you make better decisions when evaluating job offers and your current pay. But honestly, if you're serious about getting the best possible offer, I highly suggest you don't go into any salary negotiation alone. So head over to the salarynegotier.com to either work with me directly as your salary negotiation coach or check out my salary negotiation courses and tools. You'll find all the links in the episode notes below. And honestly, if you found the episode helpful, please make sure you subscribe, leave a comment, and share it with someone who could use this advice in their career. So thanks for tuning in and happy negotiating and building competitive compensation.

Brandon

TOTAL COMPENSATION TOOLS MENTIONED • Total Compensation Calculator: https://www.thesalarynegotiator.com/total-compensation-calculator • Total Compensation Research Comparison Tool: https://www.thesalarynegotiator.com/store/job-offer-total-compensation-research-comparison-tool • Total Compensation Guide: https://www.thesalarynegotiator.com/resource-center/totalcompensation SALARY NEGOTIATION RESOURCES • Salary Negotiation Coaching: https://www.thesalarynegotiator.com/ • Salary Negotiation Courses: https://www.thesalarynegotiator.com/courses • Salary Negotiation Templates: https://www.thesalarynegotiator.com/salary-negotiation-templates • Counteroffer Example: https://www.thesalarynegotiator.com/store/counteroffer-examples • Salary Negotiation Script Guide: https://www.thesalarynegotiator.com/resource-center/salary-negotiation-script-strategies-for-job-offer-negotiations • How to Negotiate a Job Offer Guide: https://www.thesalarynegotiator.com/job-offer-negotiation-course • Video Guide: https://www.youtube.com/watch?v=UylKhYuXwb0  

Head Shot

Brandon Bramley

Host