Most candidates compare offers by base salary. It is the first number a recruiter cites, the easiest one to understand, and only one part of the package.

That shortcut can leave a large share of pay out of the comparison. It also makes it hard to explain an offer to a candidate or build one for an employee.

A pay package is some combination of three pieces:

Base salary shows up almost everywhere. The other two depend on the employer. Many organizations, plenty of government and nonprofit employers among them, pay base salary and nothing else, or reserve incentives and equity for their most senior people. Read each package for the pieces it contains, not the ones you expect.

Comp professionals use a few umbrella terms to add those pieces together. If you are a new comp analyst, an HR generalist covering several jobs, or a founder building a first offer, you need to know which pieces sit under each term. Otherwise, two offers can look alike on paper while paying very different amounts.

Start with base salary

Base salary is the fixed cash you are guaranteed for doing the job, paid in regular checks over the year. It is the most visible part of compensation. When someone says, "I make $140,000," they almost always mean base. Recruiters lead with it, candidates anchor to it, and every compensation benchmark survey includes it.

Inside a company, you will hear both base pay and base salary. Companies quote it as an annual figure even when they pay employees biweekly or semimonthly.

Base stays steady when performance changes. That makes it predictable for you and easy for the company to budget. Many jobs pair that steady base with a second piece whose payout can move.

Keep incentives and bonuses straight

Variable pay, also called incentive pay, is cash you earn by hitting targets, so the company doesn't guarantee it. The most common form is the annual incentive. It runs on a formula tied to company, team, or individual results defined before the performance period begins.

A bonus, strictly speaking, is discretionary. Leadership looks back at a job well done and decides to award extra cash. Companies and candidates use "bonus" and "incentive" interchangeably all the time, but the annual incentive in a pay package is the formula-driven kind.

An offer might list a target incentive of 15% of base salary. That 15% is what you earn when the company hits its goals and you hit yours. In a strong year, you might earn 150% of target, or 22.5% of base. In a bad year, you might earn less or nothing. The money remains at risk until performance lands.

Companies almost always express the target as a percentage of base salary. A 15% target on a $150,000 base produces a $22,500 target incentive. Add the two and you get $172,500 in total cash compensation, or TCC. That is the cash portion of the package at on-target performance.

Target doesn't mean guaranteed. If you hear "15% incentive," resist the urge to put the full amount into your household budget. Ask for the plan documents and, if the company will share it, the actual payout history. Some companies also quote a maximum far above target. The maximum sets the ceiling. Use target for planning and maximum to understand the upside.

Read the equity grant

Equity compensation gives employees stock or a right to stock, usually through restricted stock units (RSUs) or stock options. An unvested option gives you the right to buy shares later. An RSU is a promise to deliver shares when it vests. You own the shares after exercise or settlement, rather than when the company grants the award.

The vesting schedule tells you when that ownership arrives. Schedules vary by company. A common one, especially at startups and in tech, runs four years with a one-year cliff. Nothing vests during the first year. When you reach the one-year mark, a chunk vests, followed by monthly or quarterly vesting for the rest. Companies use vesting to retain employees and align them with long-term outcomes.

Companies usually quote equity as a grant-year dollar value: "$80,000 in equity, vesting over four years." Treat that number as an estimate. At a public company, its value moves with the stock price. At a private startup, the grant is a paper number. It could be worth a lot, a little, or nothing, depending on exits, dilution, and whether the company survives.

That grant-year value belongs in the comparison and behaves very differently from $80,000 of cash. The vesting schedule spreads delivery over time, and the value can move before the shares become yours.

For compensation comparisons, analysts usually annualize equity by dividing the four-year grant by four. Add that annualized value to TCC and you get total direct compensation, or TDC, which companies sometimes call total compensation. TDC includes base, target incentive, and equity on an annual basis.

Know which total someone means

The vocabulary gets slippery here, and the difference can reach tens or hundreds of thousands of dollars.

Analysts and candidates sometimes say "total comp" when they mean "total cash," or the other way around. A loose label can hide a large gap. Ask which total they mean. If a recruiter quotes $220,000 in total comp without a breakdown, assume the figure includes equity and ask for each piece.

You may also hear total target compensation. Companies usually use it as a synonym for TDC at target performance. "Target" means the figure assumes an on-target incentive payout and the stated equity value. Best-case and worst-case years will land elsewhere.

See how the mix changes

The ratio of base to incentive to equity moves with the role and the company's stage. A good compensation design fits the company's cash position, its tolerance for risk, and the behavior it wants to drive.

At a mature, profitable public company, compensation tends to be cash-heavy. Base salaries run high, annual incentives are meaningful but capped, and equity takes a smaller share. The equity helps retain employees. The company can pay more cash because it has cash.

A venture-backed startup has less cash to spend. Base salaries tend to run below market, and annual incentives may be small or nonexistent. Equity can become the largest single part of TDC. The company trades ownership for cash it doesn't have yet and bets that the equity will appreciate.

Consider a senior engineer at a Series B startup with a $160,000 base, a 10% target incentive, and $200,000 in equity vesting over four years. A mature tech company might offer the same engineer a $210,000 base, a 20% target incentive, and $150,000 in equity. On an annualized, target basis, the mature package pays $289,500 versus $226,000, about 28% more. The packages also place very different shares of pay into cash and equity.

The role changes the mix too. Sales roles put more pay at risk. A sales representative's target incentive, often called commission or variable incentive, can equal or exceed base. Engineering and operations roles generally carry higher base, smaller incentives, and more equity for retention. Executives receive the most equity-heavy packages because their decisions affect the whole company and the package is meant to make them think like owners.

No single mix works everywhere. Match it to the company and the job.

Add up a full package

Say an offer includes:

A comp analyst would calculate it this way:

Ask what the package is worth and the answer depends on the lens. The package has two useful values. Target total cash in a normal year is $172,500. Of that amount, the $150,000 base is guaranteed and the $22,500 incentive depends on performance. Total compensation, including annualized equity, is $192,500. That last $20,000 holds only if the stock holds its value. At a private company, treat it as a maybe.

Compare the same number

Now compare two offers. Offer A pays a $160,000 base with no annual incentive and no equity. Offer B pays a $140,000 base, a 15% target incentive, and $100,000 in equity over four years.

Offer A leads by $20,000 on base salary. Offer B leads by $1,000 on total cash and by more than $25,000 a year on total direct compensation. The candidate and the job haven't changed. The conclusion changes because each comparison uses a different total.

When you receive a pay package, write down three lines: base, target incentive, and annualized equity. Add base and target incentive to get TCC. Add annualized equity to get TDC. Then compare offers through the same lens.

You can negotiate the pieces after that. First, make sure you have read them correctly.