Money Management

Negotiating Another Form of Compensation at Your Job

When starting a new job or pushing your boss for a raise, you’ll likely go through some negotiations before settling on a salary. Obviously the goal for most people is to get that number as high as possible and ensure they’re getting paid what they’re worth. However salary isn’t the only factor in the compensation you ultimately receive from your employer. In addition to other perks like health insurance, company cars, or even student loan repayment, employers may offer you stock options which can be a very lucrative proposition.

As Business Insider recently noted, stock options can be a great way to not only make money but to also show your commitment to your company. Most stock options allow employees to purchase shares of a company at a pre-determined price during their employment. This gives you a vested interest in the business’ success and the chance to make a significant profit should the company grow.

While stock options are nothing new they have grown in popularity among start-ups looking to keep their payroll costs low. Smaller companies have also been known to be more generous with stock options as a way to attract top talent and incentivize their hard work. However, like with any stock, these rewards come with a fair amount of risk.

The biggest drawback with stock options is that they could be rendered useless should the company’s stock take a dive or the business goes bankrupt. Not only will you be out of a job if that happens but you’ll also have the sting of knowing your time investment in the company was wasted. So how can you decide if taking stock options is right for you?

BI suggests that it will depend on where you are in life. Similar to how those closer to retiring should be more conservative with investments while younger investors can be more aggressive, those without homes, spouses, or children are the best candidates for stock options. On the other hand, workers with greater obligations may prefer the stability of a steady paycheck with higher income today.

What it comes down to is that stock options aren’t for everyone. However, if you’re negotiating starting compensation or a raise, it may be worth exploring stock options as just that — an option. Just remember to think beyond straight salary and calculate your total compensation before settling on a deal.

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