Ask HN: What's an appropriate compensation counter offer in London 2024? | Hacker News Reader

Ask HN: What's an appropriate compensation counter offer in London 2024?

44 pointsManchesterDev122 comments

Hopefully this kind of post is allowed, and also helpful to others who find themselves in this situation.

I’ve agreed goals with my employer which if I meet by the end of Q4, I’ll be promoted into a new position. They’ve set a compensation suggestion for this role, but basically suggested that it was open to negotiation. They said they got the number by quickly googling Glassdoor and were a bit surprised it was so low elsewhere. Here’s some more background (trying to keep vague for privacy) before getting into detail:

- B2B SaaS utility & renewable energy startup, nearly 4 years old. - £3-£5m ARR range, almost profitable. Top 5% fastest growing UK. - Between 20-50 employees. Multiple cofounders. Dev team <10. - Many friends and family investors, one large seed, founders still hold >75% of equity. - Poor competition in sector, but those who are ok have some seed funding too. Lots of future revenue streams, high potential for growth. Target is £10m ARR in 2 years. Founders will look for exits sooner rather than later. Company highly acquirable by some FTSE100. - London

Context: - Joined 4yo as a junior full stack. £40k comp, 0.2% equity. Offered role as good friends with founders. 1st employee. No other benefits of note. 21 annual leave days per year. - Now senior at £75k same equity. Deep domain/ sector knowledge from prior experiences, but also from writing most of the code. Established most processes and infrastructure. Even for a new senior experienced dev, catching up with the infra and sector knowledge would take 1-2 years minimum.

Offer: - Head of backend/ data to free up cofounder to be more strategic. Manage team of 3. Responsible for pipelines uptime, data quality, future R&D & design research elements when it comes to new datasets to get. We are a data led company so this is critical. - £85k no extra equity.

Other: - I have £25k of income from other sources per year, so will be pushing over the £100k mark which here in the UK is a trap which means you pay 62% tax rate on every £ over 100k until £125k where it drops back to 47% for every £ over. - I am contributing heavily to pension, but maxed out employer contributions. >30yo (edit: fixed typo), have mortgage in LCOL area (Manchester), no kids but one on the way and married.

Two questions: - What salary feels right to ask for? The stack is in my favour and may never well be so strong for me again. I don’t want to burn bridges as they are friends, but also don’t want to be taken advantage of. There will 100% be a counter offer to consider for. I have an amazing set up with this company, but can afford (financially) to walk away if needed but again don’t want to burn bridges. I also have other ideas to work on in similar sectors if needed. - Equity is handled via EMI. Should I be pushing for more? 0.2% feels low, but have seen advice here suggesting not to take equity. Should I ask for a lower salary to avoid tax brackets but more equity in return? There is no vesting schedule, so only realised on sale & if you leave its at the companies discretion about if you keep your share.

This is quite a US heavy forum, so would extra appreciate other UK perspectives, but any advice is welcome.

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> Should I ask for a lower salary to avoid tax brackets but more equity in return? There is no vesting schedule, so only realised on sale & if you leave its at the companies discretion about if you keep your share.

If you want equity -- which means that you feel really good about this company's chances -- you want actual non-revocable ownership now. Be entered on the list of shareholders.

"if you leave it's at the company's discretion" means that it doesn't exist unless you are still employed there on the day of a sale. That's not equity, that's not a lottery ticket -- that's the promise that maybe someday there could be lottery tickets. Ask for the actual lottery ticket now, or discount it right down to zero no matter how much they offer you.

Completely agree. I understand that this is becoming more common in London. This is still a harsh practice.

Which angle is becoming more common in London? Losing equity if you leave or the opposite?

> you want actual non-revocable ownership now. Be entered on the list of shareholders.

Yup. Wish I (and a lot of my ex colleagues) knew that and didn't accept below market salaries with those ESOPs.

We got ESOPs from a USA startup which has an India office (and subsidiary which employed us) and was laid off from the company. A colleague (was laid off) tried to sell it outside and was blocked by startup lawyer. Very soon those ESOPs will expire/lapse (not sure that's the term) if not exercised. Most of us (actually none of us) can reasonably exercise that. Even at that low "strike price" that was offered to us the cost to company alone will be more than 2 years' salary of most of us (for some even more) and then the income tax (and then maybe capital gains tax) will hit us which might actually be more than that strike price amount. It's in USD and we earn/earned in INR - almost ~85x difference as of now (notionally speaking).

The startup doesn't offer to buy it themselves either. They never did. I stayed there for two years and others stayed for 4-5-6 years and they don't allow us to sell it in secondary market either. So yeah, it's lost. Even if we want to, we can't exercise - we simply can't afford it.

So yes, you are so right!

Moreover, you can be fired the day before the “sale” and get bupkis. In the US many startup contracts say that if you’re fired, company can even take away your vested shares. They’ll tell you it’s only if you get fired for cause, but cause is easy to create out of thin air. Reject such clauses, and if the company refuses, do not work there. Insist on keeping all your earned compensation no matter what.

> Joined 4yo as a junior full stack. £40k comp, 0.2% equity. Offered role as good friends with founders. 1st employee.

I understand this was junior, and friends maybe helping someone learn on the job to switch careers, and probably a good and fair deal.

But since this is HN, I want to note that 0.2% equity for a first hire experienced full-stack person would be a terrible deal for the employee.

(I'm calling this out on HN, because I often see founders who think they deserve 70%+ equity, while simultaneously thinking that even a key first hire, who to a large extent could make or break the company, and brings skills founders don't have, deserves only 1%-2%, and only in options they'll probably never be able to liquidate. Just yesterday, I walked away from a recruiter pitching a seed-stage first-hire opportunity. The apparently not-very-technical founder needed a laundry list of technical skills, all over full-stack and iOS and ops, at very experienced hands-on level (they asked for no big company small cogs), as the first hire, to un-fudge the MVP they previously tried to contract-out... for below-market salary, and 0.5% equity. I told the recruiter it's ridiculous for the founder to think they deserve two orders of magnitude more equity than this mythical unicorn first hire. Then I had to clarify that I wasn't negotiating, but that (combined with other concerning signs I was previously open to discussing) this looked like definitely a stereotypical bad startup, of a kind that I wouldn't be allowed to fix. Experienced people should just say no to founders who think the company is their creation and their property, and that first/early hires are only commodity gig workers. I hope post-ZIRP VC will destroy most of the people who got away with this kind of thinking, such as with the Potemkin Village investment scam startups. And that we'll eventually heal all the follow-on negative cultural effects this had on the field.)

Agreed - I didn’t feel like I had much knowledge to negotiating power at the start and definitely got ripped at a .2%

Thanks for calling it out - we all need more educating on this

40k for full stack junior in pivotal position is a complete rip off 4 years ago, in london particularly so.

Firstly, earning more money isn’t a trap. You’d be making more than 3x the average UK salary, you can spare the higher tax rate, and it’s not like you won’t see any of the extra money.

With that out of the way, the core thing to consider here is valuation. 0.2% might be small, or it might be life changing money in the case of a sale, in my case at a similar amount of equity it resulted in a deposit to buy a house rather than buying one outright. What does 0.2% translate to at different sale prices, and does it feel like reasonable compensation for the effort you’ve put in? In terms of salary you’re pretty much at the top end of the scale for small startups with entering the C-suite already. You could maybe get another 10k or so, but if you do that forget about extra equity as well.

Secondly, it’s worth considering if you want the extra stress of being a manager. It’s a different skill set, and a different kind of work. Some people love it, others don’t. Personally I spent five years or so gradually working my up the management tiers, by the end the money was great (in the order of £150k a year including bonuses), but I hated every minute of every day. Eventually I decided I’d had enough and took a huge pay cut to go back to writing code all day for a startup, and I’m a whole load happier for having done so.

Definately consider if you want to become part of management. Other than a more glamorous title I don't think it's really worth it (in Europe). For most companies pay is not much more than engineers, and in some cases can be lower than a specialist. If you want to earn more, contracting (when the market picks up) is much more lucrative.

I transitioned from senior engineer to engineering manager a couple of years ago. Maybe it's just this company, but I feel I enjoyed being an engineer more. Definately less meetings and less stress. Plus when you go to the next job hunt, there are more engineer jobs available.

On the other hand, if you feel that your engineering skills are a bit lacking (no offense intended), but your have strong soft skills, then it would make sense to go this route. The best head of engineering I worked for was a mediocre developer, but his soft skills were amazing.

I agree with both the comments. At the moment there are no progression paths which don’t involve moving up into doing more management, but I’ll still be spending 75-80% of time writing code. If the company was larger there may have been other options internally to focus on technical roles.

Be very cautious about “you’ll still be writing code” promises. A team of three is a significant time investment, and I’m highly dubious that leading a team can be done in 1 day a week, at least if you want to do it well.

At the very least you’re going to have to learn how to write code while being regularly interrupted, and in my experience that means you’ll have to let go of doing anything interesting because you’ll end up blocking work due to unexpected things coming up.

In a negotiation, don't focus on what you think is fair. Instead consider your best alternative to negotiated agreement (BATNA). You need to have them believe you have lots of other excellent options, and negotiate against that. One way is of course job offers elsewhere, and usually the best.

I do agree with this. But bluff will be called about other offers, and not enough time to get any active before supplying my response.

BATNA is not about bluffing. It's about you genuinely understanding what your best alternative is if you can't reach agreement. This helps you negotiate better.

So if you think you can definitely get better offers (even if you don't have one now), that will influence your negotiating position to go for a higher offer.

A personal example of this. A company I was working for made a lot of people redundant, although they wanted to retain me. I wasn't happy with the situation, not least because I would end up shouldering a lot more work in the reduced team. I knew I could find work somewhere else at least on what I was getting (with less responsibility). So I asked for a raise to retain me.

They refused, and I resigned immediately. I found a much better role, on more money, with better career opportunities quite quickly. My BATNA meant I could ask for the raise with some confidence. Of course you have to be willing to follow through; I wasn't bluffing.

That’s helpful, I’ve never thought about it like this before. It’s kind of what you believe is the best alternative out there and using that. A bit like hypothesis testing and gathering evidence.

Probably easier to be as aggressive as you were if there has been a significant negative change in the company vs a positive friendly environment which I have.

Note that you have a best alternative, even if you don't improve it.

The goal is to have an active comparison, “if they just said no to everything here is what I would do and what that is worth to me.” And, you want to know the other party's best alternative, too, because you want to be able to say “I know we can do better than outcomes A and B.”

Negotiations “want” to be zero-sum and you have to constantly prop them up. There's actually strange parallels to this in theology and political science, complex multidimensional things getting collapsed to Left vs Right or God vs Satan and so forth. So we want to focus on one number, the salary, and party X wants it higher but Y wants it lower, now you have a zero sum game.

But the point of negotiation is the multidimensional space. “I want to work with you, we're on the same team here, we both want me to continue at this workplace and flourish...” is possible precisely because the space is not us-vs-them.

It's a little bit of a pipe dream but the ideal negotiation kind of sounds like, “oh, you're not able to pay me more than my manager? OK, what about getting me to be a team lead so that I am on the right trajectory? You don't have a spot for that? Well I have been thinking about starting a family, how about we explore a policy that would make it easy for me to take a chunk of that time off. No? What about these wonderful experiments with the four day work week, do you want to try those? Hum. Well, if we are really stuck on all of those, here's articles about how private companies with ESOPs beat the pants off of other companies, how can we get me some equity? Takes too long? I mean I can wait, just not forever. Want to meet in 30 days and we'll keep in touch on Slack about some of these ideas and float them to senior management?”

(Here notice that the “best alternative” is explicit, “we meet again about my career development in a month.”)

I think I got about 60% of that, but the penultimate paragraph helped a lot. I’ll have to get a beer and mull over what those best alternatives might look for me if it’s a no to salary.

I believe the previous comment is referencing the book Getting to Yes, which I think is fairly standard curriculum in business school. I have not read it, but it's on my list:

https://en.wikipedia.org/wiki/Getting_to_Yes

So if there was a reference there was totally unintentional, haha. Haven't read the book.

Like I said in a small aside, this actually has a weird parallel in Christian theology, which is one of my geeky interests. In particular the panreligious mystic Gurdjieff has a “Law of Three” where instead of creating an opposition, a dualism, a zero-sum “good vs evil, right vs wrong” scenario, you understand a Third Force as reconciling the other two.

So, the wind wants to push a boat in one direction, the waves want to push it in a different direction: but it is the operation of the sail and keel and captain/helm who has a destination in mind, which takes these opposing forces and creates a new reality, a Course or Journey. In this new reality both of the forces which would have opposed each other are actually satisfied, they come to a negotiated equilibrium where they each succeed. The wind did not quiet the waves and get it's way; the waves did not stop the wind. But because they are blowing freely in opposite directions, the mediation takes place and a larger space is realized.

So then it is fun to read Christian theology in this light. The idea is that the Trinity is actually viewable as precisely this sort of triad, and so in this sense of reality is negotiated reality, the Christian message is that God is a negotiation. And this sounds like New Age poppycock until you realize that it's basically the view of St Thomas Aquinas. Like all of the scholastics very much viewed the Trinity as an interdependence, you literally cannot speak of the Son without talking about the Father in a parent-child dynamic: that's what it means to be a son. And that dynamic you can't talk about without the spirit of familial love that pervades it, but that Spirit of love cannot be talked about independently of the parties involved either. And so the medieval view is kind of that God is sort of Unity at the core of existence, rather than Opposition.

So that's the stuff that I geek out about that informed my view on what negotiation is and how it works in the ideal case.

The other factor is that it’s just a job - you are not getting married! You can take their offer, and if it doesn’t work out or if something better comes along, you can just resign.

This is one of the key understandings regarding negotiations. They are not adversarial by nature. They can devolve into a tug of war but only if the scope is extremely limited. Expanding the scope by openly considering multiple benefits and outcomes is usually a good idea. Also, it’s good to know where you want things to go after the deal. If you foresee more opportunities in the future, you can set those up now.

Another commenter noted also that this shouldn't be a bluff. Here's an example of the kind of thing that could be helpful: "I love working here and I can really see continuing my career here for a long time. So I'm really hoping we can come to an agreement so that this makes sense."

This gets them thinking about you as a market participant and not about how small a raise they can give you. Even if you don't have active offers, understanding your value in the market is really important.

I agree with that. I have plenty of applicants who did that, and through the process it became very clear they didn’t care what they were bringing on the table and what was the value of their work, they just cared to up the stakes and get more. As a buyer, someone who wants cutthroat rates today will also want to increase their rate after their skills are demonstrated in the company (“See my skills are useful. Give me 20% more now or I leave”), it 100% lose during the rampup period, then the extra makes it 20% more expensive. Obviously none of them work here.

I’ve tracked a few of those profiles. Startups they joined fail or struggle. I guess that’s how you make money.

Why on earth does BATNA Need to exist as an acronym

The same reason other acronyms exist?

Because it’s an OAT (occasionally useful term)

Wait a minute...

Wam?

> 21 annual leave days per year.

What do you mean you only get 21 days leave per year? The statutory entitlement you must be offered is 28 days, see https://www.gov.uk/holiday-entitlement-rights

Maybe you’re not including the bank holidays, which an employer can include in the 28 days but this must be clear in your contract.

> will be pushing over the £100k mark which here in the UK is a trap which means you pay 62% tax rate on every £ over 100k until £125k where it drops back to 47% for every £ over. - I am contributing heavily to pension, but maxed out employer contributions.

Your small employer should let YOU contribute more pre-PAYE without any matching. That’s because the employer saves money too as they don’t pay Employer NI tax on the PAYE salary you avoid. If not, you can contribute personally post-PAYE and claw back income tax.

And you probably already know since you contribute “heavily”, but tax bands like 100k are POST pension contribution: if you take in £110k you can put £10k in pension and stay under the limit. You can contribute up to £60k pa and reduce the amount of higher rate (40%) tax you pay, too.

I’d never take equity personally.

20-50 employees making £3-5M ARR does not sound very lucrative to me, either. A nice family business, but not any signal of a business hitting paydirt.

Firstly, work out how much your 0.2% equity is likely to convert into. You'll probably pay income tax and employers NI on them (and in one year!) and so you'll likely end up paying 55% tax on them. How much do the founders think the company is worth right now? If it's close to £500M, that's a big part of your comp. If it's close to £50M, it's not.

Next, work out where you want to be in terms of comp in a few years, rather than thinking of how to optimise the cash right now. For example, I'd stop worrying about your tax-free allowance gradually disappearing, and instead try to work out how to get it to all be gone. In 5 years, the person who makes £120k is £40k better off than the person who makes £100k, after tax. That... sounds worth it. And it's usually easier for the person who's getting paid £120k to get paid £130k than it is for the person who's getting paid £100k. This is to say, having high tax brackets is a benefit, not a curse.

And then, it's probably worth noting - this isn't directly their money, especially if they're looking to sell. It's probably worth having the conversation of like, 'what would I need to do in order to justify £100k/year?'. Or, alternatively, negotiating on the vesting of your stock, since that's effectively free. If they think the company is going to be sold in the next few years, that's a relatively small giveaway for you. If the company's grown a lot in four years, it's unlikely a significant increase in stock is on the table.

Don't overestimate how long it'd take a good new person to catch up. I've rarely seen a role where a new person can't be effective within 6 months.

Isn't equity taxed as capital gains, not income, when you sell it?

No, you (generally) pay income tax on the current value when you receive it, and then capital gains on any change in value.

Essentially, if I pay you £15k for some services, you pay income tax on that £15k. If I buy you a car for £15k, taxman still wants £15k. Same with equity.

How it can work is that you can be granted shares and pay the taxes at time of granting (which for a founder is zero), but might not be nice for an employee.

You can also give an employee options, and this can get complicated (single or double vest).

But in general, for any equity instrument in a stock plan, you get charged income tax at one stage, then capital gains at a later stage, and you can trade off when you want to trigger each. In this case, employer has gone for a model where income tax is deferred as late as possible.

Just as a side note about publicly available salary information...

I worked in Munich, Germany for a while, and at least there, the average salaries (or even calculated recommended salary based on yoe, degree, tech stack, etc) on payscale, glassdoor etc were always significantly lower than what I've seen in real life... My friends' salary were higher, my salary was higher, the other offers were higher, the salary all my friends recommend me ask were higher etc...

And none of my friends were in a rare niche, none of them were FAANG, none of them had unique skills or background, and still...

I can only speculate as to why this is (not enough data, biased data, fake numbers, business model of the website is biased towards showing low numbers, my friends and I are better than average, who knows) but it's something worth keeping in mind.

I suspect a lot of that data is from job advertisements which go unfilled so they keep getting reposted.

Yeah, my company previously used numbers from Mercer to argue we were above average, when numbers from the union placed us below. Both of course might have a bias, the union in our favor, and Mercer getting paid to keep the numbers low.

this is US-specific information, but even at FAANG and adjacent, my experience with websites like levels.fyi is that the listed compensation, even contemporaneously, skewed very low compared to offers I knew of and was actually seeing.

generically, people are more likely to post on these compensation-sharing websites when they have gripes about compensation.

there's also the fact that many people take FAANG offers without negotiation (equity was often heavily negotiable) and you're looking at the average of a leftward-biased sample of a wide distribution.

I have a theory that Glassdoor, Indeed, etc., skew low on purpose. They want to retain business partners and businesses, more often than not, want to pay the lowest amount possible for labor.

There's also the growth factor consideration that probably isn't implemented by those websites. As in, salary data from several years ago might be not be adjusted for inflation and have the same weighting as recent salary data.

Half the time, the websites can't even gather salary info from job posts and rely on estimates despite having hard data.

What this can do is that less savvy users might not notice the estimated data tag and use the lower range in negotiations, which could ultimately lower starting salaries for workers moving forward.

I've written job boards before about this, but of course they aren't going to change anything as it isn't in the their best interests.

Really interesting insight - something I’ve always suspected and my only hypothesis is that those likely to share will also be those on ordinary salaries. For example, your high achievers on unique salaries probably won’t post as they will be identifiable, and/or are unlikely to post because they are happy at the company and there is no need to (most reviewers do it on switching co or if they are unhappy).

How does it compare to the government's official salary regression model based on company-internal payroll data? https://service.destatis.de/DE/gehaltsvergleich/index.html

Absolutely this. I'm always scared by seeing these low numbers all these sites. They have no relation to reality

I haven't been in London for a few years but less than 100k for a head of backend feels low. It might be a thing with being in the right network or in the wrong one, though, I'm aware it's above the average.

Treat equities like a lottery ticket, don't even consider it in your calculations. Most times it amounts to nothing, which will be especially true in this economy, if you ask me.

Great that you are maxing pension. Over 50k you should really put as much as you can in pension and more - as you are taxed 40% (which is insane as well, if you ask me).

My strategy for being over 100k was doing everything through a limited company.

Consider working through a limited company so you can: - Keep income in the company and defer income taxes (potentially to a future time when you are in a country with 0% tax on dividends or when you stop working and have low income for a year) - Charge expenses - Consider VAT Flat rate to pocket a few more quids (this is if you don't have expenses) - Do investments (stocks, real estate + charging rent) as a business before paying income tax - Hire your wife if she's not working - Withdraw a small amount of tax free dividends (it used to be 5k once, now it's down to 500) and I think it may be beneficial to withdraw some more dividends at a low rate over salary to reduce your nhs contributions - Other income can also flow into the company

Unfortunately you have the IR35 crap to check, so make sure all parties are ok with those terms over FTE. I personally never had problems getting roles below VP of Eng as a contractor but it depends on what managers think. The way of the remote contractor with multiple clients can also be quite lucrative (way more than a FTE)

Just an angle to think about. (im a SWE con the UK, lived in Manchester for 10 years (chrolton area) and also negotiating that 100K problem)

1) over 100K you also loose child benefits like free childcare for 2year old etc

2) What about taking time as your compensation? You will want all the time you can get when your first child comes along (trust me) so maybe half day Fridays, or an extra weeks holiday a year, with the same monetary setup you have now.

3) Do you need to "take" all your cash right now? can you move some of that 25k into business accounts where it can stay and do nothing till you decide to take 6 months off and spend it with your 3 year old (highly recommend) paying yourself a salary from dividends.

pls feel free to get in contact directly if you want to speak more :)

Why does the title say 'in London'? Everything else I've read in the thread refers to Manchester.

I agree with other posters, unless there's a clear strategy to cash in on the equity, you can consider it (to put it nicely) a bet with bad odds. You say you're friends with the founders, that should decrease the chances of you getting screwed over but it's still a possibility. And that's in the unlikely scenario that you can cash in your shares.

A question for you - if you can get a job at a company with a higher total comp (RSUs, bonus etc), why don't you? If the answer is you haven't looked at this but would be willing, get an offer and come back with it to your founders. You can do that after they give you this current raise.

Also, beware, management is different from doing everything yourself :)

I live in South Manchester, role is technically in London. We don’t have a permanent office as the team are fairly remote. When we meet it’s in London and the team hire out some rooms/desks at a cowork. I occasionally travel down, 2-3 times a month for these meet days. Centre of gravity of employees and activity is London, but we have people flying in from Scotland and France too.

Thanks for the suggestions! I could definitely shop around. I don’t have time in this round of negotiations as need to give a counter offer next week. I also really enjoy working here, it’s a good set up.

You could position where you focus on a concept like “with my current wages I have felt the need to supplement . The way I’m doing my calculation is based on getting to the a place where that is not necessary.

For what it’s worth it doesn’t mean you have to stop the Side stuff it’s just a good negotiating point

It’s a good response! But I should have added more context that the side income is passive/ only requires maximum 15 hours work per year so isn’t a heavy burden.

They don’t need to know that.. and the extra 10k for the new role feels derisory. Given the tax situation you want to push past 125k per year so ask for more than 100k but accept 100?

this is a terrible take. your employer doesn't and shouldn't care about your expenses.

the only important thing, from their perspective, is how much replacing you will cost them, and from your perspective it's symmetric: what can you get elsewhere (by replacing your employer)?

Most contracts say you can’t do work on the side in the UK without permission so I wouldn’t highlight this, just because it probably won’t impact negotiations (there’s better things to say) and at worst could cause issues where they ask you to stop. Unlikely, but in general don’t mention this stuff.

> over the £100k mark which here in the UK is a trap which means you pay 62% tax rate on every £ over 100k until £125k where it drops back to 47% for every £ over.

What's the rationale for having the tax rate drop at £125k? (Rather than stay flat or increase.)

Because the tax-setting authorities aren't competent, and it's a politically-sensitive thing to mess with

yeh that's wrong, its 40% on everything between £50,271 to £125,140, and 45% on everything above that

https://www.gov.uk/income-tax-rates

“You may have been thinking that the highest rate of income tax payable was 45%, at which point the rate of National Insurance is 2%, giving an effective tax rate of 47%.

But did you know you could be subject to an effective combined rate of income tax and national insurance of 62% if you earn over £100,000?

The 62% tax trap refers to the income band falling between £100,000 and £125,140 on which the employed or self-employed will effectively experience an income tax rate of 60% alongside national insurance contributions of 2%.

This is because for every £2 you earn over £100,000 per annum, you lose £1 worth of your £12,570 tax-free personal allowance. Your tax rate only reduces to the additional rate of 45% after the entirety of your personal allowance for that year has been eroded, i.e. on income above £125,140.”

Source: https://www.theprivateoffice.com/insights/have-you-fallen-vi....

huh! I'm wrong!

I found this easier to understand

https://taxscouts.com/high-earner-tax-returns/60-tax-what-to...

Note that the rates are different in Scotland too.

It happens in the US with how fed, state taxes interact with social security and Medicare (income capped)

It is a stupid hidden tax thing. They don't tax the first 12.5K of income, if it is below 100K. They start reducing that 12.5K limit as your income goes up, for every £2, it reduces by £1.

So, if you earn 100K, the first 12.5K of your income is not taxable

If you earn 105K, the first 10K is not taxable

If you earn 125K, there is no non taxable amount.

So the tax rate gets applied two times, that's why the strange thing between 100K and 125K happens

Whoa, and I thought that our French taxes were complicated. At least it is always more taxes:)

It also effects your eligibility for free pre-school child care, which is worth £9000 /year to effected people. As you are paying 50% ni and income tax from 80 to 100, you are better off earning 80k than 100k.

You can get around this with salary sacrifice pension, which can push your pre tax income down bellow the critical levels. But most employers refuse to offer it.

At a small company, you might be able to make them do it.

Yeah completely forgot about this angle too. Losing 780 hours per year of free child care per child really racks up.

You get significantly punished for breaching that 100k. So if you’re going to tip over, you needs to smash through it.

Another thing to consider is if the promotion will lift you into a much better career position that you can exploit later. Obviously if you think you could get something similar elsewhere quite easily then it's not so compelling. But if this would really take you up a level that would be hard to get applying elsewhere, then there is a lot of value in that too.

A 10k pay rise is nice, but you will be taking on a lot more responsibility, and they will want someone they can trust.

Always worth asking for a bit more than their offer of course. There isn't really a downside to that unless you are being really unreasonable.

As somebody who works in tech in the UK, some of my thoughts:

- I don’t really see senior engineering IC salaries below GBP 100k

- “Head of” roles are materially higher than IC roles, mid-to-high-100s.

- All of my experience is London-based so there is likely a premium compared to a market like Manchester

- There are a lot of other factors, so don’t take this as gospel, but unless it you are in a hot market like AI, your business is probably getting a 5-20x multiple on ARR - the fact that your business growth is so impressive and near profitable makes the top end of that achievable. If the primary goal is to get to 10M and the founders want to sell “sooner than later” then you probably need to mentally prepare for an exit of around 50-200M, or an outcome for you of 100-400k. The math changes significantly if the business doesn’t plan to exit for longer. But say you got 200k, does that make up for several years of below market salary and risk?

- You’ve been at the biz for 4 years? I know you say there’s no vesting schedule but usually equity vesting happens over 4 years, so you should be due for another grant if the business was in line other tech businesses

If I were in your shoes I’d definitely push for more equity. You’ve been at the business long enough to be eligible for another grant. You should make sure that, if the new grant has a vesting schedule, the entire grant automatically vests as part of an acquisition/change of control

And you also should be able to push a lot harder on salary, but again I can’t speak for the Manchester market.

Having been in the business for so long, and having received an offer for a role that you describe as critical to its success, the business should be willing to compensate you accordingly.

Something else to consider looking into is the business plans for profitability. It is not abnormal for profitable tech to pay bonuses. So if the business is indeed planning to be profitable, it could be a way for you to get outsized additional compensation if you’re willing to take some risk.

**And finally, it sounds like you have an unfair equity deal - largely at the company’s discretion? At this point all of your equity should be fully vested, and under EMI you should be able to exercise your options for a negligible amount of money. You should work really hard as part of your negotiation to get a better deal here for the existing equity, so you can own real shares of the business. And then you’ll loosen some of handcuffs - incentivizing the business to issue you a new grant as a retention strategy.

This is the sort of reply I was hoping for, thank you. I have a few follow ups:

- Do you have any sources for where you’re seeing salaries at 100k upwards? Anything online, or is this offline advertised roles? I’m going to need some evidence points to support my counter offer. I think a few senior salaries to solidify a low of 100s and a few head of salaries to set a benchmark will be helpful if I can find them.

- It’s not an AI business, but does leverage it. I think the 100k-400k at 0.2% isn’t a game changer, but double or triple that would be. Where are you getting your ARR multiple estimates from? I don’t doubt you, it just helps me assess my position.

Yeah I feel my equity offer is probably unfair, but didn’t know any different when accepting it sadly. Do you have any resources I could read to educate myself more about what I should be specifically asking for in a negotiation and how it works.

I can't give you sources but personal anecdata. I concur with what the parent poster says.

Senior salaries nowadays can go from £85k to £120k depending on the company size and how important engineering is for them. Also any "Head of" confident of their value and expertise is likely on the six figures

Sorry for the delayed reply ... feel free to email me (email address in my profile) if you have more questions

- No online sources. This is first hand data for engineers that have worked on my teams.

- Here are some resources [1] [2] [3]. During the boom a couple years ago, multiples got way higher - at the time I worked at a company that got valued at 26x. But that's not very realistic these days except for particularly hot companies. The median for SaaS is probably around 5x. But you get more points if you're growing fast, etc.

- Here are some resources [4] [5] [6]. Normally you'll see the first employee - especially the first engineering hire - get around 1%. That number drops quite quickly after the first employee. So based on your circumstances it seems you're below benchmark by around 5x, and that's further compounded by how early the founders want to exit (i.e., if you were an early employee of Instagram, then 0.2% would actually be a lot. But 0.2% of a business that wants to exit at $10M ARR doesn't make up for your risk).

[1] https://www.saasacademy.com/blog/saas-company-valuation-metr...

[2] https://feinternational.com/blog/saas-metrics-value-saas-bus....

[3] https://aventis-advisors.com/saas-valuation-multiples/

[4] https://www.hustlefund.vc/blog-posts-founders/equity-for-ear...

[5] https://www.wing.vc/docs/early-stage-hiring/how-to-determine...

[6] https://www.linkedin.com/pulse/equity-equation-mastering-fir...

For other top European locations, I would expect more than 100k GBP (130k) for your top report and anywhere from 10% more to 50% more for your level depending a bit on the industry and org style.

I think glass door like services tend to underreport normal-high salaries for various reasons but London is also very low for its expenses and I would look around at nearby markets. Even if you wouldn't want to leave the UK its easier to anchor some firms on other markets now that work location is more flexible.

Very interesting thanks

There is a 1k trading allowance that’s is pretty catch all for side gigs.

Then just SIPP enough to get below 100.

Not much you can do beyond that. There is the EIS and SEIS scheme but that only starts making sense a bit higher.

Certain types of uk share schemes you can transfer directly into ISA rather than realising it (up to 20k a year potential now bit more with that Brit isa thing). You’d need to check whether it applies to your situation though - not all company schemes are eligible

Don't get hung up on tax brackets and the loss of personal allowance. They look scary and you end up paying more tax (obviously) but you do continue to earn more money.

£100k nets £68.5k and £150k nets £91k. You're still taking loads more money home.

As you have children and start to do things with them, you will appreciate the things taxes occasionally get spent on more. Starting with the hospital, but more everyday things like school and libraries.

Money is nice. 50 vacation days is also very nice.

Where I work we don’t count holidays and I encourage all my reports to take full advantage. I’ve been on holiday twice (2 and 4 weeks) this year and take off a week here and there and I never have to worry about what I am going to do around Christmas, I always take another 2-3 weeks then.

But since “don’t count them” is a tad to vague for many people, just go for a high number like 50

Agreed about having frequent time off to enjoy life. I think the number of days I’d want to take are somewhat capped by my wife’s annual leave too. For example if she gets 25, I don’t know if I’d want an extra 25 on top of her as we love doing things together. Maybe an extra 5-10 for trips with other friends or a day/two pottering doing some DIY.

> But since “don’t count them” is a tad to vague for many people

I don't know about how it works in the UK, but in many parts of the US, certainly California, it's also an objectively bad deal.

If there is a stated amount of vacation time in your contract, the company has to pay out full salary for any vacation time you don't take, at the time of departure. Vacation is good, people should take it, but the incentive structure of "unlimited vacation" is skewed towards less actual vacation, and no compensation for that choice in the event.

If someone offers unlimited vacation, take them up on it! But make sure that the contract says "four weeks guaranteed, plus whatever other time you want". If it's unlimited, then it should be the same deal, right? This is also a good way to gauge if the unlimited vacation comp is going to be undermined by pressuring workers to stay on the job.

I agree about the clarity side. We have people in the team from different countries and they say “here it is not allowed …” but then I say “who is going to know that you didn’t work all April?

About the pressure part that is also totally true. I don’t think “unlimited” is possible at most companies. It has to be part of the culture. That is why I find it important to encourage people to take holidays and do so lavishly myself. It also isn’t so much unlimited as much as we simply don’t keep track. It wouldn’t be ok in most cases to take 2 months in a row, although it has happened. Also, we work in shapeup cycles and usually prefer people to not take last minute holiday within a project.

As I said this is all pretty vague and yet it is amazing for everyone who works here.

I do hiring on the engineering team and in this case it really works against us because it simply is too vague. It has a high “trust me it’s cool” character that a specific number would fix. “50 days” sounds more clear.

I've been in a company with "unlimited" holidays and it was not great.

You really need clarity on how much time is allowed so you can calculate how much are you making per hour spent in that company. In the end I was taking all the holidays who were mandatory in the country I was living and no more - and people were really pissed off.

American people were taking zero holidays to show they were "committed to the company". I know some people had conflicts over taking too much holidays.

Overall, you end up with people at the extremes doing too well or too bad and average people being more on the bad side than on the good one, trying to impress their managers.

Mark your salary bid to what it would cost to hire a consultant/contractor to do the same role for a year, then discount it (or add to it) accordingly. The consulting rate is the market rate for a skill.

Why should you be paid less than a consultant, or why are you more valuable than a consultant? Answer those questions and you will arrive at a fair number for all parties.

No, this is nonsense. There is a reason why consultants get paid more. They are cheaper for the company to employ (no employment benefits, lower taxation for the company to use them, more risk for the consultant).

If what you said was true, why would anyone be a consultant rather than an employee? They would be paid the same, and manifestly, they are not. Revisit your assumptions.

putting aside the quality of this objection for a moment, a company has a choice whether to hire a consultant or an employee for a role. the consulting rate is well known in the market, the employee rate is not well known. for anyone with training in negotiations, they know using principles to arrive at a price is superior to blind haggling, and it's what serious people do. the consulting fee is the employers option of last resort, as otherwise they wouldn't be looking for employees. as a coordinate for finding what an employer is willing to pay, the consulting fee is an objective waypoint.

It can be humiliating to learn how structured negotiations are and that most talent goes into them completely ignorant of the tools that are being used on the other side of the table, but that awareness is where we all start. The difference in the opinions of people who have read even a single book on negotiations are stark to those who haven't. Highly recommend.

We hire consultants because they have skills we don't have in house, or where we have a temporary need for extra resource. They are faster to hire and get budget for than a permanent employee. There is no long term committment. Their daily rate is higher but their costs are lower.

They create flexibility for the business. The idea that consultancy rates are a good guide for employee pay makes no sense.

To say that two people doing the same job under different terms aren't comparable seems disingenuous, as we know what a company has to pay if they don't have an employee to do it, and yet you're saying these aren't related?

An employee should know the consulting rate and then decide what kind of discount or premium they should anchor the discussion to. Employers try to get employees for about 50% or less of the consulting rate as salary, where an employee with unique value can get anywhere from 60%-120% of that in total comp factoring in equity and bonuses.

If you need the job, take what's on offer, but if you have any bargaining position at all, for the sake of your well being and profession, learn negotiation. An employer or hiring manager who tries to bully or gaslight you on this has told you most of what you need to know about them.

Absolutely agree people should learn to negotiate well. But comparing apples to oranges isn't a good place to negotiate from.

Employers don't set employee pay at some lower percentage of consultancy pay. And neither do they set consultancy pay as some higher percentage of employee pay. They are distinct markets. You won't get far as an employee if you try to negotiate based on the consultancy pay rate.

The statement "you won't get far" appears meant to discourage people from using the most effective negotiating tool available to them and as a threat to the ones who do, which is a pretty standard body shop recruiter hustle.

If the talent you are buying can decide between your job and a consulting gig, you have no separate markets. What absolutely aren't the same things are the negotiating techniques of high value talent vs. low skilled labor.

Employers don't "set" pay either, they are in a market, and if a candidate knows what that company pays for a related service, they can anchor their bid to it. The exception is the minority of collectively bargained jobs.

Sure, if the company is a commodity talent shop or an institution that buys talent by the pound, then there's a race to the bottom to be the most liquid asset you can be for a mature company with limited growth in front of it. If you're actually good at anything and deliver value, consulting rates are one of many leverage data points.

Be extra suspicious of anyone who tells you to take less risk, as it's cheap and not high quality advice.

We both agree that negotiating well is a good idea for everyone, whether employee or consultant.

I'm merely saying that negotiating based on a value that doesn't apply to your market will probably not be an effective strategy.

Take all the risk you want, just don't take them based on evidence that doesn't apply to you.

that's the crux of the disagreement, convincing people they can't get consulting jobs and are therefore not comparable. it's a gambit that maybe filters for agreeableness at best.

If this were a negotiation between us, and even though I've got other sources of data for framing the discussion, trying to disqualify a comparison with just persistence is a sign of poor faith. I would have walked (and have walked in similar situations) a few comments back. Your BATNA would have been to get the next more agreeable person, my BATNA is based on being able to afford principle, and this market would have settled on someone who delivers value at a level more appropriate to your needs.

I have no desire to convince people they can't get consulting jobs. Why would you think that?

I'm only saying that people should negotiate based on data that actually applies to what they're after.

But I'm repeating myself, and I don't understand where you are coming from.

There are plenty of places with ‘very long term permanent consultants’, which you buy because they’re easy to fire in less flexible job markets.

Comparing their salaries ( what they actually make in the end ) with perm salaries, and factoring in the various risk premiums/ contract differences makes sense I think.

Makes sense for what purpose?

I guess it makes sense to compare them if you are considering moving from one to the other. The consultant gets paid more, but has a different tax, expense, benefit and risk profile. The rate itself is only one part of that overall calculation.

Which brings me back to the start of this thread, where I pointed out that consultants get paid a higher rate but the costs and risks are also not the same.

>> pushing over the £100k mark which here in the UK is a trap which means you pay 62% tax rate on every £ over 100k until £125k

Pension like you say is the obvious option, the other thing that may be useful is a salary sacrifice car scheme. If your employer doesn’t have a scheme, there are firms who offer turn key setup.

Or salary sacrifice into the pension, to stay under or near 100k. Only disadvantage of salary sacrifice is it lowers your effective income if you want to apply for a mortgage.

Can you not just do additional voluntary contributions? I.e. max out your matched contributions then I’m thinking most schemes will allow you to avc into your pension as much as you like, no need for a sal sac agreement. There will be limits to how much you can avc, I don’t think they’ll care if you exceed the £60k/year but you will because that’ll blow your tax free limit. They’ll probably only care if you avc so much you put yourself below min wage.

I might be missing something though, there might be a benefit to sal sac pension I don’t know about, if there is I’m. Definitely all ears!

Sal sac car does mean your salary agreement is reduced so you’re right, would affect mortgage application or credit in general. AVC’s don’t impact your salary but obv they do reduce your take home which a mortgage application will ask for anyway so prob not much diff between.

I haven’t taken the sal sac car option yet but I’m seriously considering it.

There is another difference. Because your effective salary is lower, the employer (and maybe employee) national insurance tax is also lower. Many companies pass some of that difference on too to the pension contribution.

I heard about this supposed downside, but it makes no sense to me. For a start, when I applied for a mortgage I was asked for gross income. I guess they trusted me to figure out the rest. But the main thing is you can just stop doing the salary sacrifice at any time. It's not like you're locked in for any amount of time.

Yeah, you can just stop salary sacrifice if you need the bigger effective income. Although many companies lock you in to it on a yearly basis, so you have to plan ahead a bit.

Your gross (pre tax) income is exactly what has been reduced too. So if you are sacrificing 10%, your gross is 10% lower too.

> Your gross (pre tax) income is exactly what has been reduced too. So if you are sacrificing 10%, your gross is 10% lower too.

But it's not reduced, though, is it? If someone who isn't the tax office asks for my gross revenue I'll tell them what the gross amount that goes into my assets is. They don't ask "what's your gross income for tax purposes?"

Ah, I think you are correct, my mistake. However, some lenders will take salary sacrifice into account when doing affordability checks, and won't lend as much. I guess if they don't ask, there's no problem.

Yeah, they can ask whatever they like, I guess. I wasn't asked specifically about salary sacrifice, but they did do an affordability check and that might have included pension contribution. I also checked with my employer that I wasn't "locked in" to anything and they could change my contribution at any time.

It might be different if the sacrifice is for something that's basically essential for you like a company car. I could see that getting more scrutiny.

85k for a senior isn't bad for manchester. given that's the low range for senior in some london firms.

if I were you, I would push for more equity. as that's you're likely to gain the most. more salary is just money for the king / queen and their shenanigans.

Lots of good advice from others here. I have one tip - read the book Never Split The Difference by Chris Voss. It has some very good negotiation tips.

> Should I ask for a lower salary to avoid tax brackets but more equity in return?

Do salary sacrifice over 100k and contribute even more to the pension? Although if you maxed out employer contributions not sure if you can do this then

Not an answer, just wanted to say that regardless of the outcome you are doing well. A few years back I was doing 70k GBP in Cambridge (expensive as fuck) in my mid 30s. I could only imagine pulling +100k in a LCOL in my 20s.

Congrats.

I’m sorry, no. 75K in London is not “doing well“. Double that - maybe, though I’d never accept that personally. I love London but I would not move there to do what I do for less than 300k. And even then I don’t think I’d be able to say I’m “doing well”. Several people I know personally have left Nvidia this year - retired - in their 40s, with high 7 digit numbers in their bank accounts. They are “doing well”.

You need to be going in either 90k or over 125k as for the reasons you’ve mentioned. No salary's exist in the middle for exactly the reason you said.

No, this is not true. There are plenty of roles that offer between 100 and 125k.

If you earn over 125, you are still paying that 60% or so on the 25k between 100 and 125. Your effective tax rate drops a bit as you earn over that, but you don't avoid the tax in that interval.

Try this.

https://www.itjobswatch.co.uk/

As far as equity goes, it depends on whether you think it will ever be worth anything and if you are willing to roll that dice. I've been a paper millionaire twice at startups; neither paid off. Obviously the potential upside is high, so may be worth taking the chance.

EDIT: you say equity only pays off if they sell the company. What is the exit strategy for this company? Are they looking to be bought, and are there any obvious buyers? Is this more a lifestyle business for the founders?

If they don't have an exit strategy, then I'd say don't go for equity until that situation is clearer.

Do you mind expanding on your story here? Did the company just falter before you were able to realise your gains or was there something else more convoluted?

The first company was merged with another during the dot com crash, as no further investment could be found. It had big customers, and was almost profitable. Our existing equity became worthless in the merger.

The second company just ran out of runway and failed.

I'd not spend mental energy negotiating hypothetical salaries with a current employer, _especially_ someone you're friendly with.

I'd think about "what real offer would I need to up and leave?" and then spend a certain portion of your week pursuing that kind of offer, maybe start by finding a friendly recruiter to take the strain. You can let your friend know that offer when you get it, and what discount you'd take to continue to work with them (if any).

You might end up feeling like a crummy time for tech work (in the UK at least), and a good time to be settling for a lower salary doing interesting work, or you might find a crazy well-paid niche for your expertise that you never knew existed.

I hear what you're saying that you feel your expertise with their code & domain puts your in a position of maximum leverage, but I doubt your friendly founders see it that way. If I were advising them, I'd be urging them to consider nobody is irreplaceable (even if they end up paying someone new higher than they ever considered paying you). I'm sure your 1-2 year estimate for a run-in is pessimistic.

Would you consider a high day rate for contracting and let the employment and equity slide? If the company sold for £100m tomorrow and you got £200k, that sounds nice - but is it likely compared to the opportunity cost of working towards a real career ladder? Is it possible that they could dilute that 0.2% away? idk man, it doesn't seem like something I'd consider compared to salary.

Also - as others have said - don't bring your other income or into your salary negotiation (or let your employer do so, if they're aware of it). It's not relevant.

Sorry, not a complete strategy, but good luck with it.

Thank you for the thoughts lots to mull over.

Agree 200k isn’t going to be life changing when looking over the lifespan of a career, just quite a bit of fun, so won’t let that be the biggest sway - and it’s probably a best case scenario.

Dilution is something I’m very nervous of in perusing an equity strategy, but just don’t know how to calculate my exposure to it. I just don’t understand the topic enough.

There will be something that feels bitter if the company does sell for that figure and the guys/girls cofounders all land on a few million and me on 200k despite having done a significant amount of the code leg work. But probably bigging myself too much there.

Use levels.fyi for general salaries, align Head of Development with the salary level you want to negotiate for, and use it as evidence for that rate.

Want £100k? Find the appropriate level on the site that has that rate and make an argument that head of development is that level. You can make this argument for basically any level, with that title, so this alone might work.

Probably argue that now you have line manager responsibilities alongside development requirements you feel the salary bump doesn’t adequately reflect the much greater workload, especially without additional equity.

My recommendation is get competing offers that you'd consider taking (batna, as others mentioned) to figure out what you are worth.

You'll never actually know how much you are worth until there are offers on your desk. Actually having offers is the ultimate negotiation card that makes sure you are realistic (neither extremely delusional, nor underselling).

Of course, I recommend you still negotiate politely and respectfully (e.g I wouldn't actually say that I have 3 competing offers).

Once I asked my manager about the salary raise schedule, he said company wide is once a year (and that was like 8 months away for me), asked him once again in a week to confirm, next Monday I handed in my resignation.

I am American, but did spend 3 years in London as hire #1, later becoming CTO. This was SV company that moved headquarters to London, this was slighty larger scale than you're indicating, but same order of magnitude when I moved to London (2011-2014).

The first thing I'll say is, advice about negotiating hard—thinking through BATNA and all that—is not wrong, but it's also a specifically American perspective that you don't want to deploy blindly. Doesn't matter what culture you are in, personal relationships matter, so be thoughtful.

That said, you also don't want to be taken advantage of. It seems implied one of the co-founders is technical, but you're leading most of the code/infra level technical work, and you aren't easily replaced. It's hard to know just from this how strong your position is though. Are you the strongest engineer technically? Are you an ideal fit to lead the next phase of growth? If the answer is yes to both, then $75k + 0.2% equity feels light.

I never had EMIs, but I understand they are more or less equivalent to ISOs. A legit engineer #1 that serves as a tech lead should get 1-2% as a rule of thumb. In this case though, you say you started as junior, so 0.2% may have made sense, but you've grown and are contributing a lot more. Equity should not be a one-time thing, especially as you step into larger roles.

You're right folks advise against sacrificing cash salary for equity in private companies, because a huge percentage will go to zero. Yes, it's a lottery, but in this case you're already working for this company, and the trajectory already sounds better than 90% of startups (although "almost profitable" could be spin), so equity gives you upside. Note it's also easier for them to give you more equity because it doesn't require precious cash, and the sooner they give the equity the more valuable it will potentially have (lower strike price).

Also, I definitely agree with folks saying that your personal living situation should not factor into negotiations explicitly. What matters is your worth to them, not your expenses. That said, if you are comfortable that you can take more equity, and you believe in the trajectory of the company (and the financial acumen of the founders), and you can afford to take the risk, equity is what mints millionaires and create a real sense of cohesion in the core team. On the other hand, if you don't feel solid about the company's future and don't feel embraced by the inner circle, then just ask for as much cash as you can.

Fantastic perspectives thank you. I don’t feel like going too hard on BATNA because it’s a sensitive and positive environment. If I get mugged off, I would walk away, but I wouldn’t enter with this stance.

Answers to your questions: - 3 of 5 founders strongly technical, one exceptional, one strong but she is not involved with my line of work/ probably couldn’t do it, on par with the other, and above all other devs. - trying to be modest, but almost definitely ideal for next phase of growth if they want to maintain momentum and trajectory. Would be a big hit to lose me. 3 months to hire a new lead, 6-12months to get up to speed, but longer to understand the industry/code which is nuanced, often weird and undocumented. - 1-2% is how I feel too, but just feel they would never give this. I’m very critical and pessimistic, but genuinely feel this is the one which could break through.

I just don’t believe the decision makers believe that any head of role justifies more than 100k or more equity so it’s going to take a lot of educating..

I wouldn't call the tax effects of earning between £100k and £125k a 'trap'. It's an absurd way to do taxes, that I will admit. However, a pay rise between those figures is still earning you more money; your 'take home' income just rises more slowly than usual.

If you expect the company to continue to exist, equity might be useful to 'spread out' your income, so that you continue to earn dividends from the shares after you've changed job and have a different financial situation. However, you say that the company is not profitable, so you won't get any dividends until it is - and that the directors choose to issue them. They are under no obligation to distribute dividends even if they are profitable.

In summary, I can't answer this question:

> What salary feels right to ask for?

...but I can answer this question:

> Should I ask for a lower salary to avoid tax brackets but more equity in return?

No, because:

A: The tax brackets aren't a problem, only a disappointment - a pay rise will still earn you more than before.

B: There's no indication that your company will choose to distribute dividends in the near future (especially because it is not yet profitable and may be acquired).

C: You might have trouble selling your shares individually if the company isn't publically listed, and you might be waiting years for an offer from some mega-corp.

If I were you, I'd only negotiate for equity if I was absolutely confident that the company was going to be bought out for a good price, meaning I could take advantage of capital gains tax being lower than the 'higher' or 'additional' rates of income tax.

Useful response thank you. Hard to know what a realistic sale price would be. For example if it sold for £100m in 3 years, that would be 200k under current conditions minus capital gains. That’s probably higher than the additional salary would bring under the same timeframe, but is £100m a realistic valuation if the company got to £10m ARR probably not.. so likely lower.

I’d be using the ARR as a rough valuation in terms of realistically setting expectation vs risk.

So 4 years ago you was a junior (and your over 30, so how did you move into that, what’s your background). So junior, 4 years later given inflated title of ‘Head of’ and salary more than doubled… think you’re doing ok. If you was on job market I doubt you would get more than that and mostly be considered a senior engineer (although I have my suspicions you might not pass that, based on past experience of people working in start up silos, I may be wrong), I’m UK based.

I would say “hey, I’ve proven to be a critical part of this company since the beginning and I’d like a seat at the table to take this company to the finish line.” Then ask for 5-10% equity in addition to your salary.

I’d also say £40k was way too low. I’d guess the founders have significantly higher upside. It would be worth asking for transparency in order to determine fair compensation.

IMO close to zero chance of them saying yes to either of these

Agree 5-10% is too much of an ask. I’m not sure what is suitable for an early employee but that’s not going to float.

AFAIK, 0.5% or even 1% is normal in those cases.

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