Reality of my 62LPA package

Summary

The video provides an in-depth breakdown of the salary structure for software engineers in FAANG companies, focusing on base salary, bonuses, and equity/ESOPs. Using a real example of Guddu Bhaiyaa's career, the video compares his earnings at CultFit and Google over a span of 2.5 years, highlighting the components of CTC and the vesting process of stock options. Viewers learn about different bonuses, such as joining, relocation, and year-end bonuses, and gain insights into how salaries evolve over time in top tech companies, including the impact of equity and ESOPs on long-term compensation.

Takeaways

• 😀 FAANG companies (Facebook, Amazon, Apple, Netflix, Google) offer high salaries, especially after the boom in tech following COVID.
• 😀 A software engineer’s salary typically consists of three components: base salary, bonuses, and equity/ESOPs.
• 😀 Base salary is the amount that is paid directly to the employee each month, after taxes.
• 😀 Bonuses can include joining bonuses, year-end bonuses, and relocation bonuses, but these bonuses must be returned if the employee leaves the company early.
• 😀 Equity (in publicly traded companies) or ESOPs (in startups) are granted to employees, but they are typically vested over a period of 3-4 years.
• 😀 Vested equity/ESOPs can be sold in public companies, but ESOPs can only be monetized if the company is acquired, goes public, or buys them back.
• 😀 In the example of Guddu Bhaiyaa, his total CTC at CultFit was 28 LPA, but his actual earnings after 11 months were around 18.37 LPA due to leaving early.
• 😀 Guddu Bhaiyaa transitioned to Google with a CTC of 61.2 LPA, which included base salary, bonuses, and equity vested over 4 years.
• 😀 For the first year at Google, Guddu Bhaiyaa earned approximately 47.48 LPA, with equity vesting making up a significant portion of his compensation.
• 😀 FAANG companies usually provide substantial joining and relocation bonuses in the first year, but these may make the second and subsequent years' compensation lower than the first year.
• 😀 As employees advance in their career (e.g., from L3 to L4), their compensation increases, even though bonuses and equity vesting percentages may decrease over time.

Q & A

What are the three main components of a salary in tech companies like Google, Microsoft, and Amazon?

The three main components of a salary are: base salary, bonuses, and equity or ESOPs. Base salary is the fixed amount paid monthly, bonuses can include joining, relocation, and year-end bonuses, and equity/ESOPs represent a stake in the company, which may vest over several years.

What is the difference between equity and ESOPs?

Equity refers to shares in a publicly listed company, like Google or Amazon, which can be sold in the market if vested. ESOPs (Employee Stock Ownership Plans) are shares offered by private companies or startups, which cannot be sold unless the company is bought, goes public, or buys back the shares.

What happens if an employee leaves the company before the equity or ESOPs vest?

If an employee leaves the company before their equity or ESOPs vest, they forfeit the unvested portion. For example, joining bonuses and relocation bonuses may need to be returned if the employee leaves early.

What are the three scenarios under which ESOPs can be converted into money?

The three scenarios are: 1) If the company buys back the ESOPs, 2) If the company is acquired by another firm, and 3) If the company goes public and the ESOPs are converted into publicly tradable equity.

How is Guddu Bhaiyaa's salary breakdown at CultFit?

Guddu Bhaiyaa’s salary at CultFit had a base salary of 19.5 LPA, a joining bonus of 1 lakh, a work-from-home bonus of 50,000, and ESOPs worth 7 lakh vested over four years. The total CTC was 28 LPA, but the actual income for the first year was closer to 22.75 LPA after removing the unvested ESOPs.

How much did Guddu Bhaiyaa earn from CultFit in the first 11 months?

Guddu Bhaiyaa earned a total of 18.37 lakhs from CultFit in 11 months, considering his base salary and the work-from-home bonus. He had to return his joining bonus and did not benefit from vested ESOPs as he left the company before completing one year.

What was Guddu Bhaiyaa’s total earnings from Google after 16 months?

After 16 months at Google, Guddu Bhaiyaa earned 47.48 lakhs, which included his base salary, equity vesting, joining bonus, relocation bonus, and yearly bonus.

How does the salary package of a software engineer typically change after the first year in a FAANG company?

In FAANG companies, the salary package usually decreases slightly in the second year, as the first year often includes large joining, relocation, and signing bonuses. However, the base salary and equity continue to grow as the employee advances in their career.

Why do software engineers in FAANG companies experience a decrease in salary after the first year?

The decrease occurs because the first year includes various bonuses such as joining and relocation bonuses, which are not repeated in subsequent years. Therefore, the total compensation tends to be lower in the second and later years.

How does the vesting schedule work for equity in FAANG companies like Google?

In Google, equity is vested over a period of 4 years. The first year typically sees 33% of the total equity vest, with the remaining equity vesting in smaller portions over the next 3 years. This structure incentivizes employees to stay with the company long-term.