Submitted by brooklynlad t3_117lfu9 in technology
brooklynlad OP t1_j9cawnd wrote
Paywall Bypass: https://archive.is/EqtGD
Amazon Corporate Workers Face Pay Reduction After Shares Slip
- Stock-heavy compensation plan means employees to receive 15% to 50% below projected pay targets
The steep decline in Amazon.com Inc.’s stock over the past year is roiling the technology company’s stock-heavy compensation plan, resulting in employee pay coming in significantly lower than target compensation, according to people familiar with the matter.
Amazon pays its corporate employees a large chunk of their annual salaries in restricted stock units, and a prolonged slump in the company’s shares is causing pay for 2023 to be between 15% and 50% lower than the projected targets Amazon gave to employees, some of the people said.
“Our compensation model is intended to encourage employees to think like owners, which is why it connects total compensation to the company’s long-term performance,” an Amazon spokesman said in an emailed statement. “That model comes with some year-to-year upside and risk because the stock price can fluctuate, but historically at Amazon, it’s had a history of working out very well for people who’ve taken a long-term view."
Amazon has historically given less base-pay compensation to employees than its big-tech peers but made up the difference with stock awards that vest over several years. Employees say the longer an Amazon employee stays with the company, the more their compensation can depend on stock awards, with stocks making up 50% or more of total income for some.
Over the past year, Amazon’s shares have declined more than 35% amid a broader technology slowdown and slower growth on Amazon’s retail side of the business. When Amazon issues restricted stock units to employees, it is predicated on the longstanding assumption shared in compensation conversations that Amazon’s shares would appreciate at least 15% each year, the people said.
Until recently, that had largely been true. Between 2017 and early 2022, the stock price increased on average about 30% each year. But Amazon’s stock is currently trading around $96 per share and some employee pay packages are structured under the assumption that Amazon’s shares would be around $170 per share, some of the people said.
Because of the decline, Amazon’s human-resources team recently sent training documents to managers about how to communicate what effectively amounts to a pay cut to its employees, according to training materials reviewed by The Wall Street Journal. According to the materials, managers should focus on employees being invested in the long-term performance of the company and hold on to the restricted stock longer until there is a recovery in the company’s stock price.
At a recent all-hands meeting at Amazon’s Seattle headquarters, Amazon Chief Executive Andy Jassy addressed the situation, according to a recording of the meeting reviewed by the Journal. “I know that this is and feels like a really difficult time. We have a very uncertain economy, we just had to say goodbye to 18,000 of our teammates, the market is in a funky spot,” he said, adding that Amazon and other companies have seen an impact on their stock prices. “The result is compensations are impacted. And that is difficult. All of that is difficult. But I am quite optimistic that we have the chance to emerge from this challenging time in a relatively stronger position than we entered it.”
Last year, amid a war for talent and a slumping stock price, Amazon raised the cap for the cash component of Amazon salaries from $160,000 to $350,000. This year, the company plans on issuing raises from 1% to 4%, according to some of the people. The company won’t issue more restricted stock to employees to help them meet their target compensation for this year, some of the people said.
Amazon is in the midst of one of the toughest financial stretches in the company’s history. In November, it began the largest round of layoffs the company has ever deployed as Amazon adjusted to weakening retail demand coupled with years of mass hiring. By January, the company had laid off 18,000 corporate employees, the highest number of any technology company in this recent wave of layoffs.
The number added to other cuts made across the tech industry. Companies large and small have laid off workers in recent months, including at Alphabet Inc.’s Google, Meta Platforms Inc. and Microsoft Corp. Since the start of the year, more than 107,000 employees have been laid off across the tech sector, according to Layoffs.fyi, which tracks layoffs.
In addition to eliminating current positions, Amazon also rescinded job offers from some candidates who had accepted them and hadn’t yet started, and delayed the start date for some incoming college hires by six months. The Information earlier reported the rescinded offers.
“As part of our annual operating plan review process and in light of the challenging economic conditions, we made the difficult decisions to eliminate some roles in particular businesses for which we had extended offers but the candidates had not yet joined the company, and to delay start dates for some of our college hires by up to six months,” said the Amazon spokesman in a statement.
The company recently announced plans to require workers to be in the office at least three days a week by May 1, shifting from a policy that enabled team directors to decide how often staff would be in the office.
mrnoonan81 t1_j9cupix wrote
> Our compensation model is intended to encourage employees to think like owners
How about the owners think of them as employees. If they were receiving competitive compensation before, that means the competition will now scoop them up.
fbuslop t1_j9dy7cj wrote
>How about the owners think of them as employees
But they are owners, they should think like one too because they chose to take compensation in form of RSUs. Plenty of opportunity for them to make a high base salary where they can think like "employees". These people are high income earners, they were loving the RSU pay structure beforehand.
GothicToast t1_j9f56ek wrote
Exactly. They want all of the upside with none of the downside. Life's tough.
Silver-Armadillo-479 t1_j9fa2oi wrote
If you work for Amazon, your life isn't tough. Work may be tough, but this is a first world problem that we shouldn't even be discussing. Stupid article
Longjumping_Worry184 t1_j9dhpy3 wrote
There's a super cringrey article out there about Amazon hiring missionaries not mercenaries, meaning they want believers who want to do the work rather than someone chasing large paychecks. This came back to bite Amazon as their VP cash base was capped at 165k like all other roles, and they were losing good VPs to competors who were paying larger cash salaries and not having to wait 2 years for stock to vest. This is part of why the highly publicized base raise to 350k happened last year.
mrnoonan81 t1_j9dl4tw wrote
Did they never grow out of the dot-com startup mentality?
frolie0 t1_j9dpxtk wrote
They didn't have to. Their stock has been in hyper growth mode and people were making a fucking killing there. The RSUs over cash was totally worth it at that point. But now the scales have tipped and it's quite the opposite.
mrnoonan81 t1_j9duhul wrote
I wasn't quite referring to their compensation strategy, but the "missionaries over mercenaries" mentality.
GothicToast t1_j9f50zb wrote
> The company won’t issue more restricted stock to employees to help them meet their target compensation for this year, some of the people said.
Nor should they. That's the whole point of receiving stock as compensation. When the company does well, you can exceed your target via an increased stock price. The flip side is of the company doesn't do well, you may not meet your target. This should obvious when you take the job. If you want a job where there is no variation above or below your target, then take a job that pays 100% in base salary.
SpareWalrus t1_j9fi4xu wrote
I agree. I don’t get why people feel they can complain when they agreed to this compensation model. Inherently there is risk and you accepted that risk.
LandooooXTrvls t1_j9fnjbe wrote
They’re upset because Amazon recruiters told them employees would be issued more stock if the price ever put them below band.
So, I agree with what y’all are saying but recruiters put their foot in their mouth when they told ppl this.
GothicToast t1_j9frp00 wrote
That is totally crazy, but not totally surprising.
I am a compensation consultant in "big tech". I am often asked to build out YoY Comp models (typically at the Director level) for recruiters to use during their offer.
These models make tons of assumptions about future performance and future stock price. They're not meant to guarantees and they're not meant to be shared with the candidate. I've had recruiters share these models with candidates multiple times, which then puts us in a tough spot and creates a negative experience for the candidate when we go back and say this wasn't actually your comp.
LandooooXTrvls t1_j9fs8ry wrote
That’s exactly what happened here. It’s been a gold rush for getting good recruits so recruiters bent the rules a bit to finish the deal. Now Amazonians are upset that recruiters told them something that the company may have not agreed to. It’s also possible Amazon did plan to honor this and are going back on their word too.
arathald t1_j9g7lnw wrote
I agree with you in general, and it’s difficult to feel like it’s worth complaining about making somewhat less than the insane amounts many folks in tech do.
The real issue here is that Amazon already assumes a 15% year-over-year appreciation of the stock when it calculates pay. This means that the threshold for employees doing better or worse than target is 15%, not 0%. If the stock goes up by 10% YOY, employees get paid less than the target. It effectively offloads an enormous amount of risk from the company to the employees.
I don’t see this as “you should feel bad for Amazon employees” but rather “Amazon is in a very bad position for attracting and retaining talent”. Competent Amazon employees can and will go elsewhere and be just fine.
GothicToast t1_j9gjsut wrote
I think the amount of money they make is irrelevant and shouldn't prohibit them from complaining. My issue is complaining about a specific compensation variable that everyone knows can go up or down based on company performance and/or market conditions. People accept compensation in a myriad of ways. I had a contractor accept 2 jet skis once. He doesn't get to come back to me 2 years later when the jet skis depreciate asking for more compensation because the original compensation is no longer worth the original amount.
I, myself, am a compensation consultant in "big tech"... and while I don't have direct insight into how Amazon's compensation philosophy works, I would highly doubt they set their total comp targets with an assumption of 15% YoY appreciation on the stock. That just is not how the compensation industry sets benchmarks -- and we all use the same data to set our strategies.
If you're a comp consultant for Amazon, we should connect IRL and I'd love to learn more about how you guys roll that strategy out.
arathald t1_j9gmzb4 wrote
I'm not in comp, but I'm in a tech role adjacent to it, and I've been at the company nearly a decade. I'm not going to go into details as to how I'm so sure, but I know without a doubt that the 15% I quoted is correct, unless it has changed recently. I'm not at all surprised that this isn't standard because yeah, it's weird.
Regardless of that, this news is making clear that Amazon isn't as attractive an employer as it used to be, and I think that's the real takeaway here. Yes, people knew what they were getting into, but what they're getting into continues to get worse, and the days of soaring stock prices are over. Add on top of this that Amazon announced pay increases early last year then HR quickly walked that back and told current employees it didn't apply to us*, only new hires, and there's a huge amount of dissatisfaction at Amazon's compensation.
Yes, if people are dissatisfied and can find better elsewhere, they can leave (inertia and personal costs aside), but that's the whole point, that people *are* dissatisfied and so Amazon has a pretty significant and increasing retention risk.
*Base pay caps did apply to current employees, and base pay is now increasing above old caps, but there were no significant overall pay scale increases for current employees, only the usual incremental ones
GothicToast t1_j9hybf4 wrote
> *Base pay caps did apply to current employees, and base pay is now increasing above old caps, but there were no significant overall pay scale increases for current employees, only the usual incremental ones
This is pretty interesting to me. So you're saying when they lifted the cap, existing employees' comp was not changed, but I'm guessing new hires are being brought in within the new range (meaning way larger base salaries than their incumbent peers)? Are they given smaller new hire stock packages to balance out total comp? I can't imagine trying to measure internal pay equity between two people in the same role/grade/location and are on two entirely different comp strategies. And then keeping those two distinct strategies up-to-date against current market data. Sounds like a nightmare.
They should have moved everyone over at the same time and incurred a one-time expense, while simultaneously dropping their stock refresh budgets.
arathald t1_j9ld58b wrote
There’s some details I’m not privy to or shouldn’t share, but I can freely talk about my own pay as well as what people have told me about their pay.
When they announced the changes, my next pay statement looked like a typical year except that there was now room for the small bump to my base pay (a couple of %) brought it above the old cap. I don’t yet know the details of my comp for the next year (comp year is April-April) but I do know it’s also incremental. Obviously due to them previously publicly announcing pay scale changes, HR and management had to have conversations with current employees clarifying that our pay wouldn’t be changed more than the typical incremental bumps. We were led to believe that our pay would be increasing more significantly this year, which isn’t happening.
I also know, secondhand, that many new hires at my same level with far less experience are getting offers that are easily 1.5x or more what I’m making.
I don’t know if they have two scales like you suggested or if they just broadened the band significantly, or if they were regularly getting exceptions for new hire comp above the band for the position.
LangkawiBoy t1_j9j1vp6 wrote
The twist is every new hire will be getting paid significantly more than every person wtih 2 years at the company, if doing the same job. That's because of how Amazon pay works. The first two years you're paid mostly cash, based on your on target earnings (OTE) number. The following two years you're paid some cash, lots of stock, designed to add up to the same OTE. That means the person who joined when the stock was high has a really rough years 3 and 4 because they're getting not just 50% below what they hoped but 50% below the market rate and 50% below what a new hire would get. The RSUs at Amazon aren't so much a bonus as a core part of OTE.
What it means is skilled Amazon workers can jump ship and collect vastly more money in the open market because they're going to be paid well below the OTE for someone in their role. Including some new hire. If they leave and get hired back, instant huge raise.
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