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Comment by stornetn | Hacker News Reader

This isn’t the complete picture. It’s true that the vesting schedule gives you only 5% of RSUs in your first year, but employees’ cash signing bonus is increased to offset that. So if the total compensation target for a role is generally $500k (say, a principal engineer or a director, maybe?) and your salary is capped at $160k, you’d be given a signing bonus of $500k-$160k-(total stock vest x 5%) in cash. It’s not as though you’re paid significantly less when you start, it’s just that how you are paid is different.

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I keep hearing all the letters of FAANG have more or less similarly competitive total compensation if you factor in RSUs, appreciation, etc. But then I hear things about "cliffs" and how extremely high TCs are possible only because of stock appreciation.

In that sense, is Netflix basically untouchable in terms of compensation, if F/A/A/G (and other companies like Uber, Lyft, Airbnb, Microsoft, etc.) can only be competitive via unexpected or non-guaranteed stock appreciation?

Plus if you reach a "cliff", you end up with just your base salary - which seems like it's not too much better than a non-tech Fortune500 company?

Is my understanding wrong?

I wouldn’t want to work at a place like Netflix that doesn’t comp with equity, especially after a year like 2020. A 500k TC could easily be 800k+ now, if that’s cash it’s still 500k and worth less due to inflation.

If the stock significantly depreciates there will be layoffs anyway.

Beauty of cash is that you can do whatever you want with it. For example, buy Netflix shares. Or buy Alphabet shares. Maybe Apple. That way you can both benefit from upside and somewhat protect from downside of your own employer's shares tanking all the while you're getting laid off (as you're suggesting).

The funny thing about cash is that you can use it to buy equity. Who knows, maybe you’ll even learn to diversify by investing in areas uncorrelated to your line of work

It’s equivalent if the cash bonus is paid up front or at the beginning of 2020 when the employee starts. So 200k base and 300k signing bonus.

I _thought_ Netflix comps with a cash salary and if that’s the case it’s worth less than equity. The salary depreciated over the course of 2020 while an equity grant would have appreciated from the start.

Read my above comment.

Thanks for clarifying

We can’t base everything on 2020 though. My stock portfolio absolutely skyrocketed in 2020 beyond imagination. But it has remained mostly stagnant in 2021.

Would cash+equity comp still be preferable to an all cash Netflix comp in that case?

I guess the gist of my question is:

Non-Netflix FAANG level company salary + stock without appreciation >= Netflix all-cash salary?

To be absolutely clear, comp is not based on stock appreciation. You get your grant (aka no. of stocks/RSUs) that vest at some cadence. By the time you vest a tranche and share price has increased is an added bonus (though generally people in tech think 4x in 4 years is their birth right.)

As for Netflix, they do give you option of choosing to split your salary every year i.e all cash, all options, some cash and some options as you see fit.

Is the added bonus of increased share price required for the comp to be similar to an all-cash Netflix comp though?

Or is it still competitive without taking such appreciation into account?

I think still competitive without the appreciation. Amazon is the only employer which takes appreciation into account. Most others don't.

Please correct me if I am wrong here.

> To be absolutely clear, comp is not based on stock appreciation. You get your grant (aka no. of stocks/RSUs) that vest at some cadence. By the time you vest a tranche and share price has increased is an added bonus (though generally people in tech think 4x in 4 years is their birth right.)

This depends on the company. My understanding is that Amazon does keep stock price in mind when doing vesting of stock. If your personal projected comp is above the "intended" level (due to a large share price increase), your stock award in a given year will be smaller.

So your stock vest in year 3 might be smaller because growth was high (or your initial offer was above-market). Google and Facebook don't do this. Each year is modeled independently. Microsoft also models years independently afaik, but their stock vests slightly differently.

When you negotiate with amazon they do try to bring stock appreciation into it. It went like this:

I asked for X comp, say 100K total for 4 years, including stock. The recruiter calls me back, says she got the total I wanted, I write down the numbers and it totals to 90K. I ask her why the math does not check out and the answer was that the 'missing' 10K is the projected stock growth.

Haven't seen anything like that in other negotiations.

This is particular to amazon and is a dick move any way you put it.

I think the idea is that you'd only reach a cliff if someone decided to cut off the periodic RSU grants, and at that point you should probably have been interviewing elsewhere because they probably want you gone?

Cash bonus is taxed at a much higher rate, isn't it?

No it’s just income on your w2 same as rsus and salary. You’re thinking of long term cap gains which is entirely different matter

Bonus fits into the category of "supplemental wages" which Google suggests has a special 22% tax rate. However that rate also apparently applies to RSUs most of the time.

> Bonus fits into the category of "supplemental wages" which Google suggests has a special 22% tax rate. However that rate also apparently applies to RSUs most of the time.

This 22% tax rate is the default rate applied by your RSU brokerage which often leaves you owing taxes to the IRS. IRS treats RSU at vesting as regular income. For the tax purposes it is same as if you received their equivalent in cash and then used it to purchase the same number company shares [0].

[0] https://www.cordantwealth.com/rsus-tax-saving-and-hedging/

This is a “withholding rate” (how much tax your employer will deduct from your paycheck) not an actual tax rate that you will owe

Nope. When your RSUs vest, their value at the time of vesting is added to your W-2 income, and gets taxed at regular income.

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