Top 20 components of executive compensation you should negotiate

This article is part of a blueprint called How to Be VP: Compensation Edition. Download it and learn how to make a 7-figure difference in your executive compensation.

Top 20 components of executive compensation you should negotiate

This article is part of a blueprint called How to Be VP: Compensation Edition. Download it and learn how to make a 7-figure difference in your executive compensation.

The only rule of negotiating executive compensation is simple…

If you don’t ask, you don’t get. E-v-e-r-y-t-h-i-n-g is negotiable.

I’ve seen some crazy things negotiated in my day, from large sign-on bonuses and first-class travel to gym memberships, improved terms on stock options, and funding participation. The following is a list of 20+ components of executive compensation to consider.

1. Base salary

Your base is your guaranteed dough at the end of the day. In most cases, salary ranges are informed strongly by market data. Do your research from trusted industry resources to see what’s fair in your market. It’s powerful to be able to say to the hiring manager, “I reviewed the market data and $235k is the base for someone in my area with equivalent experience.”

2. Bonus

A bonus can be a percentage of your salary, say 5%, or a fixed amount, like $30,000. It doesn’t have to be all or nothing. If the performance threshold is not met, you can negotiate it so you still get a percentage of the total bonus.

Whatever bonuses are based on should strike a balance between metrics that impact the company’s bottom line and metrics you can influence directly. In terms of structure, some people at public companies prefer equity over cash bonuses since those assets are liquid to them. If you prefer cash in the bank, start negotiating there.

3. Sign-on bonus

A sign-on bonus is a sum of money paid to a new employee as an incentive to join a company. This is more common than people think. It’s a good lever to use if you have to walk away from a bonus in your current role or if the company can’t budge on base salary or other incentives. Some people are able to get creative with how they position it, too. For example, someone I hired negotiated a $30k signing bonus because she said to leave her previous employer she required the cash to exercise her stock options.

4. Accelerators / kickers

Accelerators, aka kickers, are incremental incentives you can earn for overachieving on your goals. For instance, a salesperson with a quota of $100k could have a 3% commission rate, but for any sales they make over $100k they could get an accelerator of 4%. I’ve seen companies use accelerators in other ways, too, whereby they’re more of a kickback—e.g., for every sale a salesperson makes from cold calling, the director of sales gets 1% of that revenue.

It’s worth noting that accelerators aren’t just for salespeople. I recommend that anyone with a bonus negotiates them. Employers are typically open to the idea because it means you would be overperforming in order to access the increased amounts.

5. Vacation time

Vacation is a self-explanatory-yet-important negotiation lever. When discussing it, be careful to understand the company’s paid-time-off (PTO) policies before assuming anything. Some employers combine vacation days and sick days, while others have rules around when you’re allowed to leverage them. Make sure there are no surprises later.

6. Coworking & Work From Home

If you don’t want to go to an office full-time, try negotiating work-from-home arrangements or how often you’re expected to be in-office—particularly now that COVID has put more power in remote employees’ hands. If you’re a remote employee who dislikes working from home but you don’t want to relocate, consider asking the company to cover the costs of a coworking space or private office.

7. Relocation packages

On the opposite end of the spectrum of Work From Home, you’ve got full-on relocation. Even in situations where relocation isn’t necessary but it would make life easier for you or the company—for example, if HQ is located on the West coast but you currently live on the East coast and don’t fancy working Eastern hours—it’s a component to consider, particularly if relocation seems exciting or isn’t a burden. I’ve even seen some executives negotiate paid-for housing and stipends when they’ve relocated to help the company launch in new markets.

8. Stock options

Stock options allow employees to purchase equity at a determined price (called the “strike price”) after a certain period of time has passed (the “vesting” schedule). At no point do you have any obligation to purchase shares, but the opportunity is given if you think it is a smart decision. As the saying goes, “options give you options”.

More details about stock options and how to negotiate them at both private and public companies can be found in How to Be VP: Compensation Edition. This blueprint includes both beginner and advanced topics for how to maximize your equity, including how to structure triggers, vesting schedules, options vs. RSUs, and more.

9. Restricted stock units (RSUs)

Restricted Stock Units (RSUs) are unregistered shares of ownership in a corporation that are issued to employees. With RSUs, a company commits to giving someone stock after a certain requirement is fulfilled. RSUs can be awarded for meeting performance requirements or being at the company for a certain period of time. Similar to stock options, this is a way of getting your hands on equity. Unlike options, there is no exercise price and taxation works differently.

More details about RSUs and how to negotiate them at both private and public companies can be found in How to Be VP: Compensation Edition. This blueprint includes both beginner and advanced topics for how to maximize your equity, including how to structure triggers, vesting schedules, options vs. RSUs, and more.

10. Time-based compensation increases

Time-based compensation increases are terrific to utilize when you’re unsure of long-term potential. For example, you could negotiate to have your bonus move from 10% of base to 15% at the end of year one if you meet certain performance targets. The same goes for base salary; you could negotiate an 10% increase at the end of year 1 if targets are met.

11. Health benefits

Health benefits are of the utmost importance to many people, especially when dependents are involved. While it might be difficult to determine the exact amount you will contribute until you go through initial onboarding, get as many details from hiring managers as possible. Imagine joining a company that says they cover 100% of insurance only to find out they cover 100% for the employee but 0% for dependents, and now you’re left paying $2k per month out of pocket.

12. Additional personal benefits

Gym memberships, life insurance coverage, increased pension contributions—it’s all on the table. If someone says they want their gym membership covered, the hiring manager may think, “Hey, it’s a little left-field, but if it makes them happy, let’s do it. The cost is small and the perceived value is high. Win-win.”

13. Travel preferences

If a role requires a lot of travel, then business-class airfare, preferred hotel chains, higher stipends, and other on-the-road niceties can make a big difference to your quality of life. Most companies don’t offer these perks by default, but don’t assume they’re unavailable.

14. Professional memberships

If you’re part of an association, club, community, or other type of group that’s related to your role, see if it’s something the company would cover for the sake of professional development and networking. The country club membership might be a tough sell, but $2k/year for access to a professional alliance and attendance to their annual events could be a no-brainer, especially if it could help with recruitment, partnerships, or other business initiatives.

15. Currency

One way to squeeze more out of an offer is to use currencies to your advantage. I’ve seen some smart Canadians negotiate their offers in USD. To them, a $100k USD salary is actually $120k CAD. If it’s a global company, this one can fly without much scrutiny.

16. Non-compete terms

Non-compete clauses in contracts limit an employee’s ability to compete with their employer after employment is over. David Schein, associate professor at the University of St. Thomas, says: “I recommend that the non-compete itself be negotiated in detail. In one case, I was able to get a company to list seven competitors where the executive could not work if he left or was fired. That left most of his industry open, should he leave that company.” Staci McIntosh, Vice President of HR for a casino resort in Las Vegas, suggests, “Negotiate that you will be released from any non-compete clause if your employment ends involuntarily or is not renewed.”

17. Exit / severance packages

An exit or severance package is a sum of pay and benefits offered to an employee upon being laid off from a company. Because it takes longer to find executive-level jobs, many VPs are able to negotiate guaranteed amounts of their salary in terms of severance.

18. Headcount for other senior leaders

One clever negotiation move is to secure headcount for senior leaders on your team who will come close to wanting near your salary range. For example, if you foresee yourself needing to hire senior directors with salaries, say, within 10-15% of yours, you’ll likely get a bump at some point to bring you in line. You need to rely on the company to do the right thing, but it’s a good card to have in your back pocket.

19. Milestone payments

If you know the role you’re negotiating for has major milestones or stretch goals associated with it, consider milestone payments. Milestone payments are payments made for achieving particular milestones (surprise surprise).

For example, a friend of mine who was VP of Finance at a tech company was able to negotiate a $100k milestone payment into his offer contingent on the company successfully IPOing. He had helped other companies IPO before and it was a goal of the board. They were happy to put a bounty on that initiative given the VP’s track record and the fact it required a herculean effort.

Some executives even prefer milestone payments over equity, as it puts more control in their own hands. More details about how and when to negotiate milestone payments can be found in How to Be VP: Compensation Edition.

20. Funding participation

Here is a black-belt negotiation move: consider negotiating the ability to participate in a company’s next funding round. Businesses can be picky about who they let ride the wave. If you are passionate about the business and you want an opportunity to invest, see if they are open to discussing it at the offer stage. One VP I know negotiated this at a series-A company, and when the time came for the series B, he was able to go all out, pooling together funds from friends and family to invest. That company went public at 14x the price he got in at and turned into an incredible outcome. Caution: your mileage may vary.

In summary: Components of executive compensation

This article isn’t a complete list of all components of executive compensation, but it’s a good start when it comes to the most common tools in an executive’s toolbelt. Consider the following twenty components and you’ll be off to a good start.

For a deeper look at how to negotiate these—particularly the equity components, including stock options and RSUs—make sure you check out How to Be VP: Compensation Edition.

About the Author

Devon Hennig was burned early on by not knowing how to negotiate executive compensation. Now, he has combined his learnings into one blueprint called How to Be VP: Compensation Edition to help others maximize their comp.