Why is the year-1 total of a job offer usually higher than its year-4 total?

## Two numbers, not one The most common arithmetic mistake with an offer is quoting a **first-year total as if it were the annual rate**. First years are structurally inflated: they carry one-time cash, and sometimes a full year of equity vesting from a grant that will not be replaced on the same schedule. Every later decision — what to ask about, how to read a second offer, whether a raise later is really a raise — depends on separating the two. ## The worked comparison Illustrative US-dollar figures for one mid-level backend offer in a major US market, invented for arithmetic practice rather than benchmark data — substitute your own numbers. The decomposed offer: | Component | Year 1 | Year 4 | | --- | --- | --- | | Base salary | 164,300 | 164,300 | | Target bonus, 11% of base | 18,073 | 18,073 | | Sign-on, one-time | 27,400 | 0 | | Equity, 149,600 grant across four years | 37,400 | 37,400 | | Subtotal | 247,173 | 219,773 | | Employer retirement match, up to 4% of base | 6,572 | 6,572 | | Total with match | 253,745 | 226,345 | The gap between the two subtotals is **27,400** — exactly the sign-on, and nothing else. That is the whole lesson in one line: the difference between the year you join and the year you settle is the one-time cash, unless something else in the structure changes. ## What else can move between year 1 and year 4 - **Bonus proration.** Many plans pay the first-year bonus in proportion to months worked, so joining late in a bonus cycle reduces year 1 rather than raising it. - **Vesting shape.** An evenly split grant makes the arithmetic simple. Back-loaded schedules pay less early and more late; front-loaded ones do the reverse. Ask for the schedule instead of assuming equal slices. - **The end of the grant.** If the original award is fully vested after four years, year 5 depends on a **refresh grant** — common at many employers but not contractual unless it is written down. A four-year total that quietly assumes refreshes is an estimate wearing a suit. - **Share price.** Equity converts to money at whatever the price is when it vests, so a grant value is an assumption, not a promise. - **Merit increases.** Base can rise, but not on a schedule you can bank at signing. ## Saying it out loud When a compensation partner opens with “Walk me through the offer,” the answer that lands is short and structured: name the components, give the first-year total, give the steady-state total, and name the gap. Something like: “Base and target bonus are the recurring cash; equity adds a slice each year; the sign-on lifts year one by that amount and then drops out, so the steady-state number is what I am really comparing.” That answer demonstrates three things at once — that you read the document, that you can do the arithmetic, and that you are not going to be moved by a number that only happens once. ## Two habits that keep the arithmetic honest First, **label every total with its year**. “247 in year one, 220 steady state” is unambiguous; a bare total is not, and the ambiguity always flatters the offer. Second, **compare like years to like years**. If you ever set two offers next to each other, put year 1 against year 1 and steady state against steady state; comparing one package's first-year headline against another's recurring number is comparing a sprint to a pace. All of these figures are pre-tax, and tax treatment differs by component and by jurisdiction, so do not net them down in your head with a single blended assumption.