$275k for entry-level software engineers? Breaking down the 2022 Levels.fyi “End of Year Pay Report”

Levels.fyi recently released its 2022 “End of Year Pay Report.” This site collected 150,000 salary submissions (verified by uploading a PDF of the offer letter) and created a leaderboard of the highest-paying companies by engineering level and geography. New-grad software engineers can make up to $275k, senior engineers up to $550k, and principal engineers more than $1M.

While these numbers appear high, let’s take a closer look at some of these companies and how much we should read into these data points.

Cash is king. Entries for companies similar to Two Sigma that pay all-cash compensation are likely accurate.

A whopping $274,000 for a new-grad salary is impressive. If you’re interested in learning more about Two Sigma, I wrote about my interview experience and $550k offer from them in this post.

Interestingly, Two Sigma is the only hedge fund / trading firm that appears on this list, which raises the question of whether there were too few data points on other top-paying hedge funds / trading firms to be published. For example, Jane Street’s new grad software engineering offers would likely earn it a spot (possibly the top) in the leaderboard. Similarly, Hudson River Trading, Citadel, Jump Trading, Headlands, and other similar firms would likely be in the same ballpark.

Here’s another data point of a Netflix engineer with 6 years of experience getting an $800k offer from a trading firm.

Shoutout to Netflix for also being a top cash-only compensation company that isn’t a trading firm or hedge fund.

Public company stock prices have fallen significantly (all numbers at time of writing).

• Roblox fell 73% this year.

• LinkedIn (owned by Microsoft) fell 30% this year.
• Facebook fell 65% this year.

For the impact of these falling prices, let’s use an example: this Facebook Staff Engineer’s $625k offer from January 2022.

They received $325,000 in stock. In January 2022, Facebook’s stock was ~$300, so let’s say they got 1,170 stock units. Assuming they didn’t sell, their stock is now worth $140k, so the yearly compensation is now $440k.

Private company compensation is more difficult to measure, and likely overvalued. There are two issues here:

Liquidity. Stripe, Cruise, Databricks, and Waymo are private companies, so their stock can’t (easily) be traded. In some cases, early employees have stock options which can be sold on secondary markets, but generally RSUs (restricted stock units) cannot be sold as easily. An exception here is Cruise, which does a stock buyback program: https://getcruise.com/news/blog/2022/a-new-kind-of-equity-program/.

Falling equity prices.

• Outside investors slashed Stripe’s valuation by 64% in 2022. https://www.pymnts.com/news/fintech-investments/2022/stripe-valuation-marked-down-64-by-t-rowe-price-global-tech-fund/
• Databricks stock fell 7% https://www.theinformation.com/articles/databricks-is-trimming-its-valuation-while-other-startups-are-slashing-theirs.
• When a private company issues RSUs, prices are based on the 409A price, determined by an independent third-party auditor such as Ernst & Young. This price is reasonable within a range, but not the true market price. It is usually decided at a quarterly cadence, so the 409A price must “catch up”.

These are median values. The report includes this disclaimer here:

So, while these numbers are representative of the highest salaries for each level, exceptionally strong interview performance, highly specialized domain knowledge, and strong negotiation skills can help you get offers above these values as well. Quantitative trading firms and hedge funds are also more likely to pay top dollar for the best engineering talent.

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