Amazon Doubles Base Pay Cap for Corporate Staff to Stay Competitive
A high turnover rate helped spur a change in the firm's pay structure
Amazon is more than doubling its maximum base salary for corporate workers. The e-commerce giant said in a February internal memo it will now cap its base pay for corporate staff at $350,000, up from its previous maximum of $160,000.
In addition to base salary, the company's compensation package for executives and professionals includes a two-year signing bonus and, making up a large share of total compensation, restricted stock units that vest over time. Both will remain part of the pay plan, Amazon said.
"This past year has seen a particularly competitive labor market, and in doing a thorough analysis of various options, weighing the economics of our business and the need to remain competitive for attracting and retaining top talent, we decided to make meaningfully bigger increases to our compensation levels than we do in a typical year," according to the memo, which was first reported by GeekWire on Feb. 7.
Amazon said it's also increasing overall compensation ranges for most jobs globally, and "the increases are much more considerable than we've done in the past," according to reports.
Recruiters said Amazon's cap on base pay had been significantly lower than many of the company's peers, which was an obstacle for the company's staffing efforts. "There is a battle for talent these days and raising base salaries as a way to lure candidates is, of course, a go-to move by companies that can afford to do it," said Carolyn Kleiman, career expert at ResumeBuilder.com.
SHRM Online has gathered the following articles that look at Amazon's action and its implications for tech-industry pay.
Amazon's Pay Increase and the Tech Industry
"When a company like Amazon does something big, the natural tendency is for others to follow suit. Other companies can't help but pay attention to it," said Garry Straker, senior compensation consultant at Salary.com.
However, he advised, it's important for companies to be cautious. "The labor market could change pretty rapidly in the next six months," he said, adding, "I think the key for a lot of organizations is making sure that their compensation programs are sustainable."
(GeekWire)
Overreliance on Stock Compensation
More than 50 vice presidents left Amazon last year. One frequently cited reason for the high rate of departures is Amazon's unusual compensation structure. Unlike other tech companies, Amazon capped salaries at around $160,000 for its white-collar workers prior to the recent increase, then added stock grants that gradually vested in steadily increasing chunks over a period of four years.
The system made many employees wealthy when Amazon stock was notching double-digit gains every year. Now that the stock price is down 24 percent since its high last July, many employees—particularly engineers and experienced managers—can earn significantly more elsewhere.
Staying Competitive with Benefits
Amazon did not rank among the top seven employers for engineering pay last year, according to Levels.fyi, which tracks pay in the tech industry. Meanwhile, the coronavirus pandemic has afforded workers greater leverage to demand better benefits and pay.
More companies are also offering flexible work arrangements, such as remote or hybrid employment. That's led Amazon and other tech companies to admit that failing to offer those benefits could potentially hurt their ability to attract or retain talent.
(CNBC)
A Good Start, but Address the Culture
In a LinkedIn comment thread, one commenter wrote that Amazon's move "is good for white-collar workers" but that "too many other Amazon workers are not making a livable wage," which may spur unionization efforts.
Another wrote that the problem at Amazon isn't pay, but rather, the culture. "There are many people who would work for less and be happy with good culture, benefits and [work/life balance]. The $160k max base was a huge deterrent for many people even considering to work at Amazon. While this is a stepping-stone and money talks, ultimately the culture needs an overhaul."
Tech Salaries Hit Record Highs, but IT Staff Feel Underpaid
A widespread need for technology professionals has driven the average salary for technologists in the U.S. to hit a record high of $104,566 in 2021, and yet nearly half of tech workers feel they are underpaid, according to the latest Dice Tech Salary Report. Web developers saw the biggest increase in pay, shooting up by more than a fifth to $98,912, while the highest salaries were demanded by IT management, whose pay rose 6 percent to $151,983 between 2020 and 2021.
Despite rising salaries and greater satisfaction with their pay, tech workers still do not feel they are being adequately compensated for their time: 47.8 percent felt they were underpaid—an increase of nearly 2 percent compared to 2020.
Will 2022 Break Compensation Budgets?
Employers can look for ways to shift funds in compensation budgets to jobs that are particularly hard to fill and retain, ranging from front-line hourly positions to science, technology, engineering and math (STEM) positions. For example, as more companies seek to manage supply chain and cybersecurity risks, pay for expertise in those areas has been soaring.
Other steps to manage pay structures include developing wider pay ranges for hard-to-fill jobs to give hiring managers greater latitude when making job offers and gathering real-time information on the state of the market from internal and external recruiters. For specific jobs, it may be necessary to conduct salary surveys and market pricing analyses more frequently than the usual annual practice.
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