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

> 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.

> 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.)

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.

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.

> 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.

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 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 :)

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

> 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.)

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.

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.

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

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.

>> 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.

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.

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.

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.

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.

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.

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.

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.