First programming job: Small Base Salary + Profit Sharing

Question

Hi,

Soon I'll be interviewing at a company that's relatively new, has a small team. After talking to their CEO on the phone, I think I have a really good shot. This will be my first development job.

I'm a little concerned about the pay structure.

They're offering a very small base salary, plus profit sharing. What's strange is this point system that was described to me that makes the pay dependent on programmer "skill". I didn't ask how this was measured, because I couldn't really understand how this system works over the phone.

The base salary works out to about half of what I make now, so if this company's not profitable, I'll have to find additional work.

Is anyone familiar with sort of thing? What kind of questions should I ask to make sure I'm not getting screwed?

Answer 1

This sounds very sketchy. You need to learn how your "skill" will be measured. Get something in writing. If they won't provide that, or really even if they do, I think the best question you can ask is "how quickly can I get out the door?"

It can be hard for many people, engineers especially, to ask hard or "rude" questions. People think they should be grateful for any job, especially when so many have a hard time finding one. A reasonable employer, though, will completely understand the need to get full and complete answers for these kind of questions.

Answer 2

I think you're right to be concerned about the salary structure.

You absolutely must get advice from someone (a lawyer or similar) who can appraise the fine print of the contract. If there is no contract or any information in writing about how your skill will be appraised, or if you have no recourse to appeal - find something else.

If you do accept you should make sure that they offer the minimum that you can live on as the basic salary. If they can't, look elsewhere: you most likely won't be able to do two jobs at once, especially if this is a startup.

Answer 3

Having agreed to and looked at similar arrangements in the past, my wholehearted advice is: Don't do it, especially not for your first job in the field. Even if it's not a right-out scheme to screw you over, you can bet it's going to place a lot of risk for the business' success on your shoulders, without rewarding you accordingly if it goes well.

Even though they may seem one of few employers are willing to take you (as you write in your comment), I would still be extremely careful (or, if you want my personal opinion, right out reject it). I personally have never seen an honest arrangement on such terms. Usually, interestingly, it wasn't even worth it for the experience because there was so much shitty work to do that there was no space to actually develop professionally or personally.

And hey, a good developer has chances to find proper work no matter where you are located. Actual work, code samples, contributions to projects, maybe even participation on SO, are things that can make a CV very interesting to an employer, whether there is a college degree or not. Maybe SO's own careers site is worth a look and an entry - it looks like a place that could open up connections for you.

Answer 4

If you can get in contact discretely with another employee in the same position you would be hired in, try to ask him or her.

Usually CEOs and management make things sound better than they are :)

Answer 5

As Michael Petrotta stated, asking how your programming skills will be measured is fundamental. Another question as important is "how much other coders make in average?".

I would never in my life take a job without having a good idea of how much would I make a month and how much would I be able to grow over time.

Answer 6

Unless you are desperate, or there is something really attractive about this job, I would very firmly ask two questions:

1. What is the historical profitability of the company?
2. What are the written criteria for evaluating your 'skill'.

I would package this by telling them that you are not interested in taking a pay cut, and that it is up to them to convince you that the system is going to pay you more than you make today in a reasonable scenario.

Answer 7

Three options, alternatives:

• You can say, "I am high skill and am worth a lot of money to the right company." Because this will be your first job, I don't know how you can say this convincingly.

• Beause it's your first job, you can care more about the experience you're getting with them than you care about the pay. If it's good experience then you'll be worth much more in a year or two, and which point (which is also after you've proven yourself to them, so that they know what they're paying for) they can up your pay in order to keep you, or, you can move.

• Maybe the CEO wants a whip/carrot to keep you motivated after you're hired, to encourage you to work long hours, or something like that.

I doubt what you've been told because I'd like to think that if you were low skill then they'd prefer to fire you than to keep you with a low salary; but maybe that's not the case.

Another reason for their offer may be, simply, that the amount will depend on what they can afford (i.e. their "profit"), which they don't know in advance. That can work out for you: they might increase your pay as they get richer: if they get richer, if you've proven yourself to be worth it to them, if they're able to (i.e. if they can afford to), and if they have to (e.g. if you're willing to leave if you don't get your due).

Answer 8

Basically, they are asking you to be an investor in the company without giving you any equity in it.

Try putting stuff down on paper:

1. Time until the company is break-even. There are 0 profits before this point so if it takes a long time (possibly forever) you aren't going to get anything other than your meager salary.

2. Difference between what you make now and what they are offering you times the amount of time in item #1. This represents your opportunity cost. It might be disturbingly high.

3. How much profit would they have to earn, over what period over what time, for your share of it to be equal to your opportunity cost?

4. List some other things you could be doing with your time/money other than this project.

Bottom line: unless you feel certain in your soul that a) this is the next twitter, b) it can be written and released in just a few months, c) that you are getting a sizable share of the "profits", and d) that they have a revenue model that will actually generate profits from this gizmo -- unless you know that for certain ...

Run away, real fast.

Answer 9

What kind of questions should I ask to make sure I'm not getting screwed?

Ask questions which will tell you what the job is, whether you can do the job, whether you'll do it well, and whether you'll enjoy doing it.

Discover (by having sought alternatives) whether this is the best (or at least a good) job available to you.

Beware if you have any reasons to believe that the CEO is in any way not telling you the truth: it's his or her job to motivate people, to be plausible, to be a bit of a sales person: but if they're willing to lie to you then I'd be reluctant to enter a contract, to have any expectations based what they've said, to feel we're on the same team with aligned interests.

Meet (and interview) the other people you'll be working with (e.g. your manager and team leader).

Ask questions which prepare you for the job: imagine you're already hired, this is your first day on the job, and so you expect to be told what the job is so that you can do it, and be told what the job conditions are so that you can agree to them.

I'd ask how much variety (in the work) there'll be: whether you'll specialize, or what.

The interpersonal relationships are important. Ideally you may also be getting your next job via someone you meet at this job.

Answer 10

Joel Spolsky wrote an INC article 'Why I Never Let Employees Negotiate a Raise' on what sounds like a similar sort of pay-scale that he uses at fogcreek. The article makes it sound like a pretty fair deal, and it could help give you an idea of what questions you should ask about the pay-scale being offered.

Be careful, and get a clear idea of what you are signing up for.

Answer 11

One thing you can always be sure about: whenever employer offers you anything unusual - it's to make you do more for less. Actually, forget the "unusual" part.

Answer 12

I'd be careful about a few things:

1. If the company is new, how well are they funded? If the company is running low on money that may be a reason why the pay may not be so good. If the company has tons of money, then the low pay would be a yellow flag to my mind.

2. Are there other perks that may be worth a paycut? Basic things like flexible hours, dress code, work from home, nice job title or stock options come to mind as things that a company may put out there as a carrot.

3. If in the interview you don't get a simple explanation of the "skill" and profit sharing, that'd be what I'd use to determine whether or not I'd want such a job. If your would be boss has communication skill issues, better to find this out early rather than be in the job and discover this problem. Perhaps you could go through the levels of skill easily and get a better salary, but how often are your skills reviewed and assessed? That's another question I'd be sure to ask.

Course I got burned a little by a couple of dot-coms a few years back, so that is where some of my experience ties into the cautions on this that are a lot like the other answers.

Answer 13

I would make sure that you get in writing exactly what you're getting in exchange for a smaller salary. Find out what causes the profit sharing to kick in for the company, and how the amount you get is determined.

If this isn't in writing, don't ever count on it.

I worked at a place that had a structure similar to this.

It was set up so that you got a base salary (less than the going rate), and you also got so many "shares" of the company.

Being new to the market in the area, I went ahead and accepted it because it seemed like a good opportunity. Once I was there, I talked to HR about these shares, and it turned out they were worthless. Basically if the company were to ever go public, I would get that many shares of stock. Not much hope for a company that had been in business for 10 years, and had yet to turn any profit (kept up by the owner's rich parents).