How to value an RSU offer against base salary
Discount the equity for vesting risk and volatility before you compare two job offers.
RSUs · Strategies
How do you compare a job offer with a big RSU package against one that is mostly salary? You discount the equity before you add it up, because a dollar of RSU is not worth a dollar of salary. Salary is cash you can count on. RSUs are a promise that pays only if you stay long enough and the stock holds up. Treat them as equal and you will talk yourself into the wrong job.
Why a salary dollar beats an RSU dollar
A dollar of base salary arrives every two weeks, taxed and spendable, with almost no conditions. A dollar of RSU value at the offer stage has to survive two filters before it reaches your bank account. You have to stay through the vesting schedule, and the stock has to still be worth something when it vests. Either one can knock it down.
Paid in cash on a schedule. You do not have to wait for it, you do not have to bet on it, and the number does not move with the stock market. Low risk, fully liquid, taxed as ordinary income.
A promise of shares that vest over years, usually four. You forfeit the unvested part if you leave, and the value rides on the share price, which can fall before you ever sell. Higher risk, delayed, and concentrated in one company.
That is why a stated comp number like “$200k base plus $200k equity” is not $400k. The $200k of equity is worth less than $200k of cash the moment you account for what could go wrong between the offer and the vest.
How to discount the equity
You do not need a pricing model. You need a haircut that reflects the two risks, applied before you compare offers.
Turn the grant into a yearly number
Most grants vest over four years, so a $200,000 grant is about $50,000 a year, not $200,000. Compare per-year equity to per-year salary, never the headline grant to an annual wage. Mixing the two is the most common offer-math mistake I see.
Apply a vesting-risk haircut
Discount the yearly equity for the chance you do not stay to collect it. If you are not confident you will be there four years, the back half of the grant is worth a lot less to you than the front. Cut it accordingly. The further out the vest, the deeper the discount.
Apply a volatility haircut
A public stock with a known price still moves, so trim it for that. A private-company grant gets a much steeper cut, because the price is a paper estimate, you usually cannot sell, and the whole thing can go to zero. Private equity in an offer is the most over-counted number in tech compensation.
Add the discounted equity to the salary
Now stack the haircut yearly equity on top of base and compare offers on that honest total. A pile of risky paper often loses to a smaller, certain salary once you have done this. Sometimes it still wins, and now you actually know.
Watch out
A private-company grant is worth far less than the same dollar figure at a public company. You generally cannot sell the shares, the valuation is an estimate, and you may owe tax on shares you cannot turn into cash. Discount private equity hard, then discount it again.
The second-order cost nobody prices
Here is the part that does not show up in the offer letter. Taking the equity-heavy job is a decision to load your future net worth onto one company, the same one that pays your salary. If the stock sinks, your pay and your savings take the hit together, and a sinking stock often comes with layoffs. You can lose the income and the equity in the same week. That is concentration risk, and you are signing up for it before day one.
There is a refundability cost too. Salary you have earned is yours. Equity you walk away from is gone. The more of your comp sits in unvested RSUs, the more it costs you to leave a job that turns out to be wrong, which quietly chains you to a place for reasons that have nothing to do with the work.
The other offer pays less salary but the recruiter says the equity makes up for it. Does it?
Maybe, but the recruiter is quoting you the undiscounted number, and that number assumes you stay the full schedule and the stock holds. Run your own haircut on the yearly equity, add it to the lower base, and compare it to the cash-heavy offer on equal terms. If the equity-heavy job still wins after an honest discount, take it with open eyes. If it only wins on the undiscounted figure, the recruiter is selling you risk as if it were cash.
What this means for you
Never compare a stated comp number straight across. Break the grant into a yearly figure, haircut it for the odds you leave early and for how much the stock can swing, then add that to base and judge the offers on the real total. Cut private-company equity hardest of all. A certain salary you can build a life on usually beats a bigger pile of paper that pays only if two things go right. Know which one you are choosing, and choose it on purpose.
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