How much to defect?

21 April 2017
While I don't plan to change companies anytime soon since I have other things on my mind, I do know people who are and I have been thinking about what to recommend. I am now at the stage in my career where I get headhunter approaches on a semi-regular basis, and being at the age where I need to become increasingly cash-flow positive, what would and would not persuade me to change companies is a real question. For this article I will delve into the somewhat deliberately opaque remuneration systems that are prevalent in large IT-related companies, and what to expect when trading in a job.

Why I (last) defected

When I joined my previous company my stated salary expectation was my previous UK salary converted into Euros, and it was not long before I realised how seriously low-ball this expectation was, but at the time I accepted this as part of the cost of my balance of priorities at the time. They were pretty much destined to be a stop-gap for other reasons, but there was little hope of them retaining me for long once I realised that they were not a place where I could earn the market value of my skill-set. For me the final push was their appraisal system: At the time I was not used to such corporate charades, but working under Agile/Scrum made it difficult to point to anything as specific achievements, so the resulting lists looked puny compared to what I did at my then-previous company. What I felt were the bottle-necks in my knowledge, mainly the grubbier parts of Puppet and MCollective, were things I didn't really care about in terms of a longer-term career. Ironically the offer for my current company came through 15 minutes before my second appraisal meeting, which made it impossible for me to take it seriously.

Working out base-line remuneration

In many tech-related companies the non-basic part of salary is quite significant, so things are that bit more complex than asking for a comparable basic salary. The main such component is deferred remuneration such as restricted stock awards. Although bonuses are technically not guaranteed, in practice they have a certain amount of predictability. One way or another you ought to have a feel for how much ends up in your bank account. As a base-line a job offer should guarantee the income you would reasonably expect if you instead stayed with your current company. You have no idea how good or bad the prospective company's non-basic remuneration scheme will be in practice, and a core principle of changing companies is not being worse off in any circumstance. Changing companies is trading known for unknown, and in the process is a trade-in of non-tangibles such as goodwill. These all need to be factored into the asking salary.
Basic salary
My first-ever base salary increase was a whopping 7% but since then they have usually been somewhat tokenistic, often around 2-3%. Either way it is a simple case of applying the percentage increases one has got in the past with their current company.
Bonuses
A difficult one but in practice bonuses are somewhat predictable. They tend to be linked with company performance/profitability rather than personal contribution, but more often than not getting zero bonus is a de-facto reprimand that is one step above termination. The one thing not to include is recognition awards that are linked to specific events, as they are the main component in the unpredictably of total renumeration.
Stock units
At my current company these are awarded after every year of service, and they vest over four years. Being stock rather than cash there are valuation issues, but such awards usually include a discount to protect against stock market falls, and in any case that is all a side-calculation that is beyond the scope of the principles I am trying to convey. The important part is that receiving the tranches of each stock award is only dependent on staying with the company, so they can be booked as a de-facto increase of base salary. Any other compensation for the forfeiture of these otherwise guaranteed deferred remunerations is simply inadequate.
A complicating unknown is the effective salary progression at the new company, which in the worst case could be flat-line. As a result asking salary needs to take account what one would expect to be getting in 2-3 years, rather than what one expects to get in the subsequent 12 months.

Cost of disruption

Changing companies is quite disruptive. Even before changing you have to go through the effort required just to get the new job. You will have had at least one interview, and that means you will be expending precious annual leave. For every successful job application it is likley you will have had a few post-interview rejections, and then there is all the applications that don't even get that far. For one job offer expect at least five interviews, which in turn could mean as many as fifty applications. That in itself is a big time commitment, as in the modern job market the amount of personalisation expected of job applications is much higher than 10 years ago, and a lot higher than 15 years ago.

Once in a new job, as a rule of thumb it will take at least two develpment cycles to really get up to speed. Some companies may have a lot of compliance-related training, and this in itself could take up several weeks. Even when up to speed it could easily be 3-6 months before you have fully adjusted to internal work-flows & policies. First impressions matter and what others think of your modus operandi is mostly set early on, which means being that bit more alert than usual. During this time you will likley as not be putting in more effort (and possibly hours) than is strictly required, and this will have an effect on your non-professional life. This disruption has to be worthwhile, so in the absence of anything else, this means an increase in pay.

Loss of hidden parks

While every company has its annoyances, every company will also have benefits that you simply will not know about before joining. Many of these are down to how individual business groups work in practice. For instance some software development groups often have de-facto form of flexitime, because of a prevaeling attitude that all that is required is not to miss meetings and get the work done. Move from this to a company that uses Agile/Scrum will result in a big culture shock. What is common practice at one company might well land you in hot water at another, so take note of what a future employer might frown upon. If you reasonably expect to have to give up perks, hidden or otherwise, it is reasonable to expect something in return.

Relocations

So far I have only discussed changing companies, and not having to change accomodation as well. In my case my relocations have involved emigration, which is at the top end of the spectrum of disruption. Some if it can be clawed back, but from personal experience in purely monitary terms moving between countries will involve burning through about €10,000. Temporary accommodation, emergency tax rates, transport, currency exchange costs, it all adds up. However relocations will be very disruptive to your whole life, in particular you will be back to scratch in terms of social circles. Long-distance relationships have poor prognosis so expect a breakup, and it could easily be a year or so before you have anything resembling a proper social circle.

Taxes

Trust the government to ruin any parade. You will have somewhere between 40% and 60% of any salary increase stolen by the government, so when working how much better off you need to be for a company change to be worthwhile, you need to convert between gross and nett earnings. As I write this I have a message from a recruiter in Belgium for a job involving RTP (network video) and Docker containers. Using some online taxation calculators I worked out that for the same nett monthly earnings, they would have to add €25,000 to my gross salary just for me to break even.