Amazon Ends Stock, Bonus Awards To Pay For Raises

Earlier today we suggested that for all its pompous generosity, Amazon's announcement to boost minimum wages to $15/hour was i) just another brilliant PR stunt by Jeff Bezos and ii) was meant to punish the company's retail competitors, most of whom would see hits to their margins if they tried to piggyback on Amazon's move.

It now appears that the more cynical take was indeed correct, because just one day later, Amazon announced that it would cut stock and bonus awards to pay for the raises.

In a statement, Amazon said that "the significant increase in hourly cash wages more than compensates for the phase out of incentive pay and RSUs. We can confirm that all hourly Operations and Customer Service employees will see an increase in their total compensation as a result of this announcement. In addition, because it’s no longer incentive-based, the compensation will be more immediate and predictable."

And while some hourly employees will see an increase in their total comp, it appears that many others will see a decline. As Yahoo Finance reports, several Amazon warehouse workers talked about how the change will negatively affect them. They said that after the removal of these perks, some workers would be making less. Most of the workers who voiced concerns have been working for the company for more than two years, and have been earning close to $15 an hour before the raise.

While these workers’ hourly rates will rise modestly, they said that they would lose thousands of dollars that they would have collected from the stock and monthly-bonus programs. Amazon said those who are already making $15 an hour will see an increase in pay but did not specify how much.

One employee earning $15.25 an hour who has worked for Amazon for more than three years in Arizona crunched the numbers. He said that although he is getting a $1 an hour raise, which would equate to as much as $2,080 in additional pay a year, he could have earned a few thousands of dollars more from the incentive programs. “Amazon isn’t giving its employees a raise, they’re taking money from us,” he told Yahoo Finance. “It only looks good if folks don’t know the truth.”

According to Yahoo Finance, in the past, Amazon had used stock options as a major selling point during the recruiting process.

“One of the ways we foster ownership among employees is through Restricted Stock Unit (RSU) awards. RSUs are a key part of our global compensation program, which has been carefully designed to help us attract, motivate and retain employees of the highest caliber,” according to an Amazon brochure about the program.

Under the RSU program, full-time warehouse workers usually receive two or three shares each year after a two-year vesting period. This could explain why Bezos has been quietly shifting away from paying in stock - which is soaring and last traded at $2000, having tripled since 2016 - and instead choosing to pay in cash. Amazon said it’ll replace RSU with a “direct stock purchase plan” but didn’t offer any specifics.

The other key perk that Amazon is phasing out is employee’s monthly bonuses, called Variable Compensation Pay (VCP). An employee can earn up to 8% of their monthly income, but it depends on how many hours they work and the facility site’s production goals. An average worker usually receives $1,800 to $3,000 a year through the VCP program, according to employees. Some said it’s especially frustrating to see the program removed now, since VCP doubles during peak months in the holiday season.

And despite complaints that Amazon's decision would ultimately result in less worker pay, the company said its decision to eliminate the financial incentive program was based on employees’ feedback.

"We’ve heard from our hourly fulfillment and customer service employees that they prefer the predictability and immediacy of cash to RSUs,” the company wrote in a blog post. “The net effect of this change and the new higher cash compensation is significantly more total compensation for employees, without any vesting requirements, and with more predictability."

Predictability yes, but "more compensation", we doubt it: Jeff Bezos did not become the world's richest man by generously handing out money...