How to Evaluate a Job Offer: Total Compensation Guide

Most people evaluate a job offer by looking at one number: the base salary. Everything else gets a quick glance before they either accept or decline. This is how people end up leaving tens of thousands of dollars on the table without realizing it.

A complete evaluation of any job offer requires looking at seven distinct components, understanding how they interact, and converting everything into a single comparable number before making any decision. This guide walks through exactly how to do that.

The seven components of total compensation

Every job offer contains some combination of these seven elements. Missing even one of them when comparing two offers produces a misleading picture.

How to calculate 4-year total compensation

The most reliable way to compare two offers is to calculate the total value each one delivers over four years. This timeframe is standard because most equity grants vest over four years, which means your full compensation picture becomes clear at that horizon.

The formula is straightforward. Take your base salary and multiply by four. Add your expected annual bonus multiplied by four. Add the full equity grant. Add the signing bonus once. Add your annual 401k match multiplied by four. That is your raw 4-year total compensation.

In this example Offer A wins by over $83,000 over four years despite having a lower base salary. This is the kind of result that is impossible to see when you evaluate offers by base salary alone.

The cost of living adjustment

When two offers are in different cities you need one more step. A dollar in San Francisco does not buy the same amount as a dollar in Austin or Denver. To make a fair comparison you need to adjust each offer's total compensation by the cost of living in that city.

A $200,000 salary in San Francisco has the same purchasing power as roughly $148,000 in Austin. This single adjustment can completely reverse the apparent winner when comparing two offers in different cities.

How to evaluate equity in the offer

Equity is where most candidates make their biggest evaluation mistakes. There are three things you need to understand about any equity component before you can properly value it.

First, the vesting schedule. Most grants vest over four years with a one year cliff. You receive nothing for the first twelve months. Leave before the cliff and you receive zero equity regardless of how long you worked there.

Second, stock price risk. Your RSU grant is quoted at today's stock price. By the time it vests the price could be 30% lower or 40% higher. Model at least three scenarios and never evaluate equity at face value alone.

Third, for startup options specifically, understand the liquidation preferences. If investors hold preferred stock with a 2x liquidation preference they receive twice their investment before any proceeds reach employees. In modest exit scenarios this can mean employees receive far less than their percentage of ownership suggests.

The golden handcuffs calculation

If you are currently employed and have unvested equity, leaving costs real money. Before evaluating any new offer calculate how much unvested equity you are walking away from at your current employer.

Divide your total unvested grant by the months remaining until full vesting. That is your monthly accrual rate. A $120,000 unvested grant with 18 months remaining means you are leaving $6,667 per month on the table when you quit. A $25,000 signing bonus at the new company covers only 3.75 months of that loss.

The complete evaluation checklist

What most people get wrong when evaluating offers

The single most common mistake is negotiating on base salary without understanding the full picture. Someone might push hard to get a $5,000 increase in base salary while ignoring the fact that the competing offer has a $50,000 larger equity grant. The negotiation wins the battle and loses the war.

The second common mistake is evaluating startup equity at face value. A 0.1% stake in a company valued at $50 million is worth $50,000 on paper. But if investors have a 2x liquidation preference and the company exits at $60 million, employees with common stock receive very little after preferred shareholders are paid out first.

The third mistake is ignoring cost of living entirely. Remote work has made this more visible but many candidates still accept offers in expensive cities without adjusting for what their salary actually buys. Two candidates with the same job title and the same salary can have very different real incomes depending on where they live.