Of all the questions asked during a job interview, surely, "what is your expected compensation?" is one of the most awkward. Sure, there are the ritual "what is your greatest weakness?", "why should we hire you?", and "tell me about how you handled a conflict in your career" questions, but queries about compensation make us squirm, and for good reason. So, how do you respond?
In general, I think this is an extremely unfair question to ask a candidate. There are several parameters that make up total compensation, both quantitative and qualitative -- base pay, bonus, benefits, stock options, vacation time, work-time balance, comparison to prior job, and so on. A recruiter or interviewer attempting to condense everything about a job down to one "compensation" question is being disingenuous.
Given that, what do you do when asked this question? Well, it depends somewhat on when during the recruiting process the question is asked:
- During the initial phone screen: Quite frankly, this is a "screening" question. Depending on your response, the recruiter intends to pass you on to the next step or weed you out. My advice is to simply respond with wording such as, "I've applied for this role because I believe that it is an excellent fit for my future career aspirations. At this early stage, I think it makes more sense for us to understand if our requirements match. I feel certain that once we agree that we are a match, we can come to an agreement on total compensation.". Really, it's far too early to be saying anything about compensation and anchoring yourself to a figure that may not be realistic. A lot of people will answer this question with a ~20% hike over their existing salary. But that's not really a good answer, it's a stab in the dark. You could be pricing yourself out of a job or undervaluing yourself, especially if you've been underpaid at your current job. Don't do it. Really.
- During the initial phone screen (when pressed): What do you do when the interviewer says "I'm sorry, but I need an answer from you, otherwise we cannot move forward with the process."? Before responding to this hardball, consider the following: (a) The recruiter has been instructed to ask this silly question - do you really want to work at this company? (b) How badly do you want to move to the next step? If you feeling that you cannot reply as in (1) above, perhaps you respond with "my current base compensation is in the range of $x and $y. I also have a benefits package consisting of Z. I expect that my new employer would provide a compensation package favorably comparable to this.". If they do push you even further for a single number, walk away. It really isn't worth it in the long run.
- During the initial in-person interview process: See (1) above. A phone screen and a first round interview are very similar, except that now your recruiter has decided you're actually a viable candidate. Resist the temptation to throw out a number. It's better to say something such as, "I would rather spend my time with you understanding the role and how I might be a good fit for it. Obviously, compensation is important, but there are several parameters that impact job selection including base pay, benefits, the work-life balance, and the potential future career growth. I would be happy to discuss this if we find that we are a good match".
- During the final interview process: I'm beginning to sound like a broken record, aren't I? You still don't have the job, but you've come far enough along in your courtship that neither side will just want to walk away and start afresh. This gives you, contrary to what you might think, even more leverage. You can articulate some of this confidence with, "I'm honored to have come this far in the interview process. Although compensation is very important to job satisfaction, I'd like to continue to understand how we fit together as employer and employee and defer compensation requirements to an appropriate future time.".
- Once you have the offer intention: Now, we're talking. It's always good to have the offering company make the first offer, if possible. After all, they know what they want to offer, they know their benefits, and they really want you (nobody wants to walk away at this stage). If asked for "a number", you should try to have them make the first offer with words such as, "I know we are both very anxious to commence our relationship and I'm very excited for the opportunity to enhance my career here. I would like to understand the details of your compensation package before making a decision". If they do ask you for a number, be prepared, though - you can't play dumb forever. Presumably, you have an idea of your market value. I would be clear and analytical and I'd always provide a range, rather than a number. For instance, "From my own market analysis, and considering my qualifications of a, b, c, and my experience in p, q, r, I believe that a base compensation in the range of X and Y would be an appropriate starting point for negotiation.". Don't be unrealistic, on either the low or high side - once you state a range, you reduce your ability to negotiate.
So, there you go. To summarize:
- The question is an unfair, trick question.
- If you can, do not answer it directly. Focus on the fit, first.
- If you must answer it, provide a well thought out range, rather than a number. You cannot walk back a single number!
- Be prepared to walk away.
I know this is not easy and personal factors may influence how you respond (for instance, you desperately need a job). In general, though, this strategy will serve you well.
Thoughts? Opinions?
/Editors note, 18 Oct 2018 - Added "salary" to the heading to make it easier to find on search engines.
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Aurobindo Sundaram is a security executive with 17 years of experience in the information security space. He has built information security programs from the ground up and published at length on practical security governance. He has also written code that went into Windows NT, met Bill Gates, visited 49 of the 50 US states, and he really, really enjoys Sichuan cuisine. He plans to write about leadership, execution, and the state of information security. The opinions presented above are his personal views and are not those of any organization with which he is affiliated.
This article has been updated for 2022. In February 2022, Amazon increased their maximum base salary from $160,000 to $350,000.
We created this video to help you understand how you get paid at Amazon. If you just started at Amazon, are considering employment, or have been working at the company for a few years and want a better sense for how your salary and RSUs work – this video is for you.
There are three different ways Amazon employees are paid:
Base salary: This is very straight-forward, you will receive your base salary every month.
Sign-on bonus: Many new employees will also receive a year one and a year two sign-on bonus. The bonus is paid out with every paycheck, so in essence it’s just additional salary for the first two years you are at Amazon. As a quick example: If you were entitled to a $60,000 year one sign-on bonus, you will receive an additional $5,000 per paycheck. The same method of payment (every paycheck) will occur in year two, simply divide your year two sign-on bonus by twelve.
Restricted Stock Units (RSUs): Stock vests will begin on your first anniversary. You will receive additional stock vests at the end of year 2 and then every 6 months until you’ve been with the company for 4 years. Many Amazon employees receive additional refresher RSUs as an Amazon employee over time. Recently, Amazon announced a 20-1 stock split that is scheduled to take place in June 2022. I discuss the announcement in more detail in this Geekwire article.
Before we go through the example of what the numbers and percentages look like, it’s important to mention that total compensation will vary substantially depending on your specific role and level. The total comp package for a new employee coming in at Level 4 will likely look substantially different than someone coming in at Level 8.
In this example, your starting salary is $150,000 with a bump to $155,000 in year two and another bump to $160,000 in year three. You received an on-hire bonus of $200,000 in year one and $155,000 in year two. We will also assume you are entitled to $600,000 in restricted stock units and that the initial stock price does not change. RSUs are distributed at the end of the year for your first two years at Amazon, the distribution frequency changes to every six months in years three and four.
You can see the payout timeline in the chart below:
Here is a little more detail about when to receive your stock vests:
- End of year one – 5% of the initial grant ($30,000)
- End of year two – 15% ($90,000)
- Six months later – 20% ($120,00)
- End of year three 20% ($120,000) for a total of $240,000 in year 3
- Six months later – 20% ($120,000)
- End of year four – 20% ($120,000) for a total of $240,000 in year 4
- Your total stock vests = $600,000
You will notice a big difference in RSUs between years one and two, and years three and four. Your on-hire bonus essentially makes up that compensation difference in the first couple of years with the company. Your year one on-hire bonus is almost always going to be a bit bigger than your year two on-hire bonus, because in the second year you have 10% more of your stock vesting.
You’ll also notice that in years one and two, much more of your Amazon compensation is fixed, whereas the longer you’re with the company the more variable your compensation becomes. This is because the value of your RSUs are directly tied to the stock price of Amazon (remember above when we mentioned the increase to the maximum base salary – this is where you will see the benefit of that change). When it comes to the income generated by your RSUs, obviously, if Amazon does really well, you could experience positive spikes in your compensation. However, if Amazon’s stock price doesn’t do as well, you could see your total compensation remain relatively flat, or if the stock price drops you could see your total compensation go down. We have another article that will provide you with some insight on how to think about investing your Amazon RSUs.
On the positive side of things, this means employees may have less of their income tied to RSUs. There are two reasons this can be beneficial:
- You can expect a larger paycheck on a regular basis, making it easier to budget, plan, and save. There is no way of knowing how much income will come from future vesting shares of Amazon stock.
- It will be easier to keep your investment portfolio diversified and to avoid building up a concentrated position of Amazon stock.
On the downside, it may be more challenging for some when it comes to building long-term savings. We realize that many employees use their RSUs as a long-term saving strategy by allowing their RSUs to build up over time. These shares tend to be out of sight, out of mind, which essentially is a form of forced savings. [Not what we recommend this but it happens all the time.] By shifting some of this compensation to a paycheck, it puts more of the savings onus on the employee.
When Amazon announced the base pay increase, they also announced a change for when employees would be compensated after a promotion. Rather than waiting until the next compensation cycle, now managers will review compensation at the time of a promotion, and issue additional stock awards mid-year as warranted. A win for newly promoted Amazon employees!
We encourage Amazon employees to develop a strategy for managing your RSUs based on your financial goals and needs.
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