Amazon Preps Managers for Employee Pay Questions After Stock Drops

  • Amazon employees have lost more than 30% on stock awards they got last year.
  • Internal guidelines instruct managers how to handle tricky compensation questions from employees.
  • Even CEO Andy Jassy saw his 2022 compensation drop realized by 25% because of the stock price decline.

Amazon wants its managers to stress the “long-term” value of stock and “ownership” of work during the annual employee compensation reviews that started earlier this month. Managers should not disclose individual performance ratings or other people’s pay with employees either.

Those are among the many talking points shared in internal guidelines that list potential questions and answers for Amazon managers to review before one-on-one meetings to discuss pay with workers. The Q&A, a copy of which was obtained by Insider, covers an array of topics, from inflation to pay equity. (Here’s the full text of the guidelines).

“One of our principles is Ownership; leaders are owners. They think long-term and don’t sacrifice long-term values ​​for short-term results,” one of the talking points states.

Amazon has been preparing managers for what could be a contentious series of conversations with employees as a new round of annual compensation is doled out soon. Rising inflation, slowing growth, and a turbulent job market — including 25,000 job cuts by Amazon — are contributing to growing anxiety among Amazon’s rank-and-file. The company’s shares have slumped by more than 30% in the past year, which adds an extra layer of tension as many workers get paid a lot in equity.

Amazon has always shared similar Q&A guidelines with managers. But this year’s talking points are more prominent on the internal compensation website to ensure the company delivers a unified message, according to people familiar with the matter who spoke on the condition of anonymity because they’re not authorized to speak to the press.

These annual discussions are important because Amazon has historically offered less cash base pay compared to some of its peers. Instead, it has used restricted stock units, or RSUs, and the potential for massive share price increases, attracts and keeps talent. That strategy worked well when Amazon shares surged from 2009 through most of 2021. But last year, the stock plunged, undermining the value of the stock awards as an employee-retention tool.

In an email to Insider, Amazon’s spokesperson said the company’s compensation model has always been tied to its long-term performance. “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,” the spokesperson added.

Last year’s RSUs are worth about 30% less

Amazon employees started receiving their annual pay updates on April 5 this year, according to internal documents reviewed by Insider. Managers are expected to share a “Personal Compensation Statement,” or PCS, with each employee by April 30.

Most Amazon employees are expecting declines in their total compensation. Last year, Amazon RSUs that start vesting this year at $3011.51 per share, or $150.57 on a split-adjusted basis, according to one of the internal documents. As of Monday, Amazon shares are trading at around $102, a 32% drop from last year’s grant value. If the employees sold the shares they were awarded last year at Monday’s price, they would end up with 32% less money. Employees can choose not to sell and hold on to their vested shares for a longer time.

Even Amazon CEO Andy Jassy is losing money. In a company filing last week, Amazon disclosed that Jassy’s total unvested RSUs dropped by $139.5 million in value over the past year, and his “realized compensation” for 2022 fell 25% as Amazon’s “stock price declined over the course of the year.”

Managers are to say Amazon’s pay structure “reflects the importance of maintaining ownership by taking a long-term view of performance and success,” according to the guidelines.

For a separate question about stock volatility, managers are told to say Amazon’s double planning cycle helps address it. “Every year is reviewed twice, so in this cycle we have reviewed 2024 and 2025. In Q1 2024, we will review 2025 again and 2026. In this way, we plan for stock variations,” the guidelines said.

For new RSUs given this year, Amazon used a vesting price of $97.81 per share, according to a separate internal document obtained by Insider. That price is based on a 30-day trailing average stock price. Amazon assumes an additional 15% increase in share price when planning for each of the future year grants.

“Granting RSUs for future compensation years encourages employees to think long-term in alignment with our philosophy,” the guidelines said.

Amazon’s spokesperson told Insider that some employees may make more money this year than last if they were promoted or performed well. The extent of change could also vary by the percentage of their compensation that is from RSUs.

‘Cost of labour,’ not ‘cost of living’

The annual pay updates can cause additional anxiety for many Amazon employees because it gives a clue to their cryptic performance rating. Amazon tells managers not to share individual performance grades, which are broken into five broad buckets, so employees often have to infer where they stand based on the level of raises they receive in the PCS, as Insider previously reported.

“We don’t share specific ratings. Instead, we focus on the performance summary (Exceeds High Bar, Meets High Bar, or Needs Improvement) to help employees know where they stand relative to Amazon’s bar and to support your ongoing career development conversations, ” the guidelines said.

If an employee is unhappy about their ratings, managers are told to say they are based on “several factors” and to suggest one-on-one meetings to build “continued upward progress.”

On the question about lower-than-inflation increases, which caused complaints in recent years, Amazon encourages managers to say the pay increases are based on “cost of labour,” not “cost of living.” Cost of labor refers to what peer companies pay in a specific market and it “factors in any inflation that may affect pay,” according to the guidelines. If an employee disagrees with their pay, managers are to have an “open discussion” and determine whether an adjustment is necessary.

In the case an employee asks whether their compensation is “good” relative to others, Amazon tells managers to transition the conversation to the individual and their specific growth plans.

“‘Good’ is a relative term and could steer the conversation towards comparison against peers,” the guidelines say. “Bring the focus to the individual employee and their individual compensation. Discourage compensation comparisons against peers and do not discuss other employees’ compensation.”

Some employees may ask why their direct reports are making more than themselves, it said. In that case, managers are instructed to explain the different factors determining pay, such as tenure and performance in roles.

If an employee asks how Amazon ensures pay equity among peers, managers are encouraged to stress market data and the different elements considered for each pay package.

“As a people leader, it is important to view each direct report’s compensation history and future-looking projection to support the best employee experience for your team,” the guidelines said. “As a company, we use market data to establish ranges to help create equity for job roles and levels, while allowing flexibility to account for performance, career growth, etc.”

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