--- title: Why Move Toward Total Compensation? description: "Traditionally, salary and equity have been treated as separate elements. Today, employees increasingly evaluate offers and rewards in terms of total value: base pay, variable pay, and long-term equity combined." --- [Skip to content](https://helpcenter.pequity.com/support/why-move-toward-total-compensation#main-content) English Show submenu for translations [More support](https://helpcenter.pequity.com/support/kb-tickets/new?hsLang=en) ![Logo (1)](https://helpcenter.pequity.com/hs-fs/hubfs/Logo%20(1).png?width=202&height=50&name=Logo%20(1).png) - [Pequity](https://pequity.com/) - [Platform](https://pequity.com/solutions) - [Blog](https://blog.pequity.com/) - [Login](https://pequity.app/login) - [Get a demo](https://pequity.com/contact) Open main navigation Close main navigation - [Pequity](https://pequity.com/) - [Platform](https://pequity.com/solutions) - [Blog](https://blog.pequity.com/) - [Login](https://pequity.app/login) - [Get a demo](https://pequity.com/contact) - English Show submenu for translations - [More support](https://helpcenter.pequity.com/support/kb-tickets/new) - Contact us Contact us How can we help you? - There are no suggestions because the search field is empty. 1. [Support Center](https://helpcenter.pequity.com/support?hsLang=en) 2. [Pequity Best Practices](https://helpcenter.pequity.com/support/pequity-best-practices?hsLang=en) # Why Move Toward Total Compensation? ## Traditionally, salary and equity have been treated as separate elements. Today, employees increasingly evaluate offers and rewards in terms of total value: base pay, variable pay, and long-term equity combined. A holistic approach enables companies to: - Benchmark competitively: Compare apples-to-apples across peers, even when others lean heavier on cash or equity. - Drive alignment: Ensure salary, bonus, and equity incentives work together to reinforce company goals. - Enhance transparency: Help employees understand their “real” value — not just paycheck vs. potential upside. - Support retention: Balance short-term stability (salary) with long-term engagement (equity). #### Key Principles for a Holistic Compensation Philosophy ### 1. Market Alignment - Benchmark using Total Target Compensation (TTC) or Total Direct Compensation (TDC) = Base + Short-Term Incentive + Long-Term Incentive (annualized). - Choose your market positioning: - 50th percentile: at market - 60–75th percentile: above market / competitive - 90th percentile: leading market (typically only sustainable for market leaders or emerging spaces like AI). - Caution: targeting the 90th %tile often leads to “chasing your own tail,” since you become the market setter. This requires strong internal controls (e.g., tracking acceptance rates, burn, and offer ratios). ### 2. Flexibility by Role & Level - Calibrate TDC mix based on role competitiveness: - Technical or executive roles → more equity weighting. Early-career or non-technical roles → higher cash stability. - Use guardrails to ensure fairness: - Aim for a set percentage of employees within ±10% of target. - Track offer acceptance rates by role and level. ### 3. Communication & Transparency “You cannot value what you cannot measure.” Employees need clarity to trust the system. - Educate broadly on philosophy, and deeply on mechanics: - Show total package value, including current equity worth. - Explain vesting, strike price, dilution. - Outline formulas for promotions, merit increases, bonus proration. - At Google we published our merit matrixes, rounding rules, etc. - If it was algorithmic, it was public. - Keep some details internal: - Exact market targets (since sources and timing vary). - Individual peer pay or performance outcomes. - Full pay ranges (unless you have strong ops to support range max transparency). ### 4. Sustainability & Budgeting - Recognize that TDC may diverge from pure salary trends. - E.g., inflation pushes salary up, while market downturn reduces equity value. - Model long-term costs of equity grants under different growth scenarios. - Ensure your approach scales as headcount grows. #### Practical Steps to Implement ### Audit Current Practices - Assess how you currently benchmark salary and equity. - Combine them to calculate your actual TDC. - Compare to market percentiles to see where you stand. - Compare components (salary vs. LTI) to identify imbalance risks. - Remember: summing 50th %tile salary + STI + LTI ≠ 50th %tile TDC, because survey data aggregates components separately. ### Define Your Philosophy - Evaluate your current market position and offer outcomes. - What’s your offer acceptance rate by role and level? - 60% was considered “good” at Google - Are declines due to pay mix (e.g., lack of bonus) or level? - Use this to set a target position (e.g., “We target the 65th percentile of TTC for all roles, leaning on equity at leadership levels”). - Define what each element is for: - Salary = pay for today’s work. - Bonus = recognition for past performance. - Equity = investment in future impact. ### Run Scenarios - Use benchmark data to compare your mix vs. market. - Model alternative structures (cash-heavy vs. equity-heavy). - Build hypothetical offers to see budget impact. - Ask: does this reallocate budget toward business-critical groups? ### Update Tools & Processes - Use a comp management platform (like Pequity) to model salary + equity together. - Upload new ranges, model scenarios, and generate total compensation statements for clarity. ### Educate Managers & Employees - Train managers to explain TTC consistently, anchored in your philosophy. - Provide talk tracks, guides, and FAQs. - Teach employees to value equity realistically (vesting, dilution, long-term growth). #### Suggested Resources - Tools & Platforms: Pequity, OpenComp, Carta Total Comp. - Survey Providers: Radford, Mercer, OptionImpact. - Reading: - *Competing for Talent in the 21st Century* (Harvard Business Review) - First Round Review articles on equity and comp strategy   #### Takeaway By shifting to a total compensation philosophy, companies signal fairness, competitiveness, and alignment with employee expectations. 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