How to Read a Compensation Package Before You Sign

The offer lands at six on a Thursday and the first line you read is the base salary. Read a compensation package the way a buyer reads a purchase agreement instead: base, the bonus that was actually paid, equity on its real vesting terms, the 401(k) match, health premiums, paid time off, severance, and the clauses that take money back. The number in bold is the easiest line to read and the least useful one to compare.

You know the feeling of that email. The number in bold is bigger than your current one, the recruiter has already texted, and the last paragraph gives you seventy-two hours. Everything in you wants to say yes and go to dinner.

This piece takes a US senior-level offer apart line by line, gives the question that gets the real answer out of HR for each one, and ends with a way to put two offers side by side on total cash plus expected equity.

What a Compensation Package Is Really Made Of

Start with how much pay never appears in the salary line. The Bureau of Labor Statistics measures what US employers spend per hour worked, and in its June 2026 release private industry employers spent $46.89 an hour on compensation, of which $32.82, or 70 percent, was wages and salaries and $14.07, or 30 percent, was benefits. Paid leave alone came to $4.40 an hour for full-time workers, 8.1 percent of the total.

Those are averages across every private job in the country. At senior level, once you add a target bonus and an equity grant, the salary can fall to half of what the company expects to pay you in a year. So write every line of the compensation package down with a dollar figure next to it, including the lines the offer letter leaves vague.

Base Salary and the Bonus That May Not Arrive

Base is the one line that is guaranteed, and even it carries questions. Where does the number sit in the band for the role? Top of the band means small raises for years. Ask when the next review falls and whether you are eligible for it in your first year, because a start date in March can mean nothing until the following spring.

If the base needs moving, the conversation is a short one and it happens before you sign. Our guide on how to negotiate salary covers the exchange, and the salary negotiation email piece gives the wording for the written version. The position you hold on the day before you sign is the strongest you will have for at least two years, which is why asking for a raise later is a harder conversation than fixing the base now.

The bonus is where the headline starts to lie. “Target bonus 30 percent” means 30 percent of base if the company hits its plan and you hit yours. The offer letter will not say what the plan was last year or whether anyone hit it. So ask the question that matters: what percentage of target was actually paid, at this level, in each of the last three years. A company that paid 95, 100 and 110 percent has a real bonus. One that paid 40, 60 and 55 has a 30 percent target worth about half that.

Equity: RSUs, Options and the Vesting Cliff

Equity is the line with the largest number and the least certain value. A restricted stock unit is a promise to deliver a share on a future date, so it is worth something as long as the stock is. An option is the right to buy a share at a fixed strike price, so it is worth nothing until the price is above the strike and only the difference after that. A grant of $400,000 in RSUs and a grant of $400,000 in options are different animals.

Then comes vesting, which decides when the promise turns into property. The four-year schedule with a one-year cliff is only a convention; the real terms are in a grant agreement you may not see until after you start. One restricted stock unit agreement filed with the SEC by KBR is a useful example of how specific these get: every unit vests on a single day, the third anniversary of the grant, and only if the employee has been continuously employed from the grant date to that day. Leave the day before and the agreement says the employee forfeits the unvested units “for no consideration”.

The same document shows the other clauses to look for. Death and disability vest the units in full. Retirement before seventy does nothing unless the committee approves it. A change in control on its own triggers nothing; vesting on an acquisition needs a qualifying termination within two years of the deal, the double trigger that most senior people want and few check for. None of that is unusual, and all of it decides whether the biggest number on your offer is money.

Ask for the grant agreement and the plan document before you sign, and read three clauses: termination without cause, resignation, and a sale of the company. For options, add the post-termination exercise window. For a private company, add the most recent valuation, the preference stack above common stock, and any realistic route to selling.

Unvested equity is a line on a spreadsheet, and the mistake is to spend it in your head. Our net worth by age piece is built on money you can touch, and the lesson that runs through the Warren Buffett books applies in reverse here: a thing you cannot sell is worth what someone will pay for it on the day you can.

The 401(k) Match, Health Premiums and Paid Time Off

For 2026 the IRS allows an employee to defer $24,500 into a 401(k), with an $8,000 catch-up from age fifty, which takes the total to $32,500, and an $11,250 catch-up at ages sixty to sixty-three. The employer match sits on top. “We match 50 percent of the first 6 percent” is 3 percent of base, and on a $250,000 salary that is $7,500 a year the salary line never mentions.

Three questions reveal what the match is really worth. Does it vest immediately or over several years? Is there a true-up at year end, so that front-loading your contributions does not cost you match? And does it apply to bonus as well as base? Our piece on choosing a financial advisor for a 401(k) covers the investment side once the money is in.

Health premiums are next. Ask for the employee’s monthly share of the premium for the coverage tier you will use, the deductible, and whether the company puts anything into an HSA. For family coverage the gap between two employers can be the size of a modest raise, and it appears in neither offer letter.

Paid time off is last. Count the days, then ask whether they accrue, whether unused days are paid out when you leave, and what “unlimited” means in practice. An unlimited policy usually means no accrued balance and nothing paid out on exit, a benefit for the company dressed as a benefit for you.

Severance, Non-Competes and the Clauses That Take Money Back

The lines at the end of the letter are the ones you will care about most if things go wrong, and the only moment you can change them is now. Severance at senior level is negotiable before you sign and nearly impossible to negotiate after. The questions are how many weeks or months, what triggers it, whether it covers termination for “good reason” such as a demotion or relocation, whether health coverage continues through the period, and whether unvested equity accelerates. If the offer is silent on severance, ask for the standard executive agreement; most companies at this level have one.

The non-compete needs reading. The federal ban that many people remember was never enforced: a Texas district court set the FTC’s rule aside in August 2024, and on 5 September 2025 the FTC formally acceded to the vacatur and dropped its appeal, saying it would pursue non-competes case by case instead. So the clause in front of you is governed by state law and its own wording. Check the duration, the geography, the definition of a competitor, and whether you are paid during the restricted period. A year’s unpaid restriction on “any company in the industry” is a year of your career handed over for free.

Signing and relocation bonuses look like gifts and read like loans. Most come with a clawback: leave before an agreed date, usually a year or two in, and you repay the bonus, often the gross amount rather than the net you received after tax. Ask whether the repayment is pro-rated by month, whether it applies if the company terminates you without cause, and whether it is gross or net. A $50,000 signing bonus with a gross clawback and a role that turns out to be wrong after eight months is a $50,000 debt.

Anyone who has sold a company recognises this part. The buyer reads the warranties more carefully than the price, as our piece on how to sell a small business shows from the other side of the table, and here you are the asset. It also helps to know your own stress tolerance before you accept a clawback that would pin you to a role you had stopped believing in.

The Questions to Ask HR, Line by Line

Put together, the questions fit on one page. The table is the version to take into the call.

Line item	The question to ask	The trap
Base salary	Where does this sit in the band, and when is my first review?	Top of band on day one, then flat raises for years
Target bonus	What percentage of target was paid at this level in each of the last three years?	A 30 percent target that has paid 50 percent of itself
Bonus timing	Is year one pro-rated, and must I be employed on the payout date?	Leaving in February forfeits all of last year
Equity type	RSUs or options, and at what strike?	Options under water are worth nothing
Vesting	What is the cliff, and what happens on termination, resignation and a sale?	Single-day cliff, single-trigger change of control
401(k) match	What is the formula, when does it vest, and is there a true-up?	A match that vests over three years when you stay two
Health premiums	What is my monthly share for family coverage, and the deductible?	A premium gap that appears in neither offer letter
Paid time off	Does it accrue, and is it paid out on exit?	“Unlimited” means nothing paid out when you leave
Severance	How much, what triggers it, and does equity accelerate?	Silence in the offer letter
Non-compete	How long, where, which companies, and am I paid during it?	Twelve unpaid months out of your own industry
Signing and relocation	Is the clawback pro-rated, gross or net, and does it apply if you terminate me?	Repaying gross on money you received net

HR will answer most of these on the spot and come back on the bonus history and the grant agreement. Write the answers down in the same hour, with the name of the person who gave them. Our piece on how to remember things quickly is about exactly the kind of detail, a percentage and a date, that is gone by the following morning. The answers they refuse to give are data as well.

How to Compare Two Offers

With the answers in hand, two offers can be laid side by side on four lines. Line one is guaranteed cash: base, plus any signing bonus you would keep if the role went wrong within a year. Line two is expected cash: base plus target bonus multiplied by the average percentage paid over the last three years. Line three is expected equity per year: the annual vest at today’s value, with a haircut you choose for a private company or a volatile stock. Line four is the benefits difference: the match in dollars, the gap in health premiums over a year, and paid days off at your daily rate.

An illustration with made-up numbers shows the shape. Offer A has a $260,000 base and a 30 percent target that has paid 70 percent on average, so expected cash is $260,000 plus $54,600. Offer B has a $240,000 base and a 40 percent target that has paid 95 percent, so expected cash is $240,000 plus $91,200. The offer with the smaller headline is ahead by roughly $16,000 before equity and benefits are counted.

Equity then decides the order. The same $50,000 annual vest is a probable payment at a public company with a steady stock and a hope at a Series C company with a preference stack above you. Put your own probability on it and write the discounted number down.

The whole model takes an afternoon, and it belongs at the top of the productivity plan for the new role. Do the arithmetic in the morning when your judgement is fresh. The Jeff Bezos morning routine we examined puts the high-quality decisions before lunch for this reason, and an offer is one of them.

Signing With a Clear Head

The seventy-two-hour deadline is the last line to negotiate. Ask for a week. Most companies grant it, and the ones that refuse have told you how they will treat you after you arrive.

Use the time for the spreadsheet above and for the question no spreadsheet answers, which is whether you want the work. The Jeff Bezos regret minimization framework asks what the eighty-year-old version of you will think of the choice, and at eighty you will not remember the base. You will remember the role, the people, and whether the equity turned out to be real.

The Executive Insight is a publication. Before you sign, have an employment lawyer read the agreement and a financial adviser look at the equity; an hour of either costs less than a clause you did not understand.

Then sign the version you have read, every line of it, and go to dinner knowing what the number in bold was actually worth.

Frequently Asked Questions

What should a compensation package include at senior level in the US?

Base salary, a target bonus with a stated percentage, an equity grant with its vesting schedule, a 401(k) match formula, health coverage with the employee premium share stated, paid time off, severance terms, and any signing or relocation bonus with its clawback conditions. If a line is missing, ask for it in writing before you sign.

How do I value RSUs in an offer?

Divide the grant value by the number of vesting years to get the annual vest, then apply a discount for how likely the shares are to be worth that much and how easily you can sell them. For a liquid public stock the discount is small. For a private company it should be large, and the number you write down should be one you could live without.

Is it reasonable to ask HR what percentage of bonus was paid in previous years?

Yes. A company with a real bonus plan will give you the history readily. A reluctant or vague answer tells you to value the bonus line well below target.