by - Amazon told officials it has decided to reduce the number of stock awards for employees in 2025.
- The company is considering increasing the cash portion of the salary instead.
- Amazon employees have demanded a higher base salary as its stock price recently fell.
Amazon is reducing the number of shares it plans to give employees as part of their compensation, a move linked to a potentially broader effort to adjust the company’s approach to compensation amid uncertainty economic.
In a recent internal memo, seen by Insider, Amazon told officials that stock awards to employees — called restricted stock units, or RSUs — for 2025 will be reduced due to the economic climate and the company’s budget. . The document also cites a possible change to Amazon’s compensation model that would give more money to staff, a change that could offset any potential weakness in its share price.
Plans for 2025 are part of Amazon’s compensation review cycle, which typically spans two years. In 2023, for example, most employees receive a compensation summary that shows total salary for that year and stock awards for 2024 and 2025. Amazon will reassess 2025 compensation in the first quarter of next year to “plan the variation of actions”. according to another internal document seen by Insider.
“As we finalized compensation this year and reviewed the combination of an uncertain economy, our compensation budget for the business and the possibility that we may adjust our compensation model in the future to be more balanced between base compensation in cash and equity, we made the decision to slightly reduce RSU awards in the last year of the outlook (other years are not affected),” the post reads. “The final year of the outlook” refers to 2025, given the two-year grant cycle that begins next year, according to a person familiar with the matter.
Amazon shares are currently trading at roughly the same levels seen in the summer of 2018 and spring of 2020. This lack of stock appreciation has caused some employees to complain about the value of their earnings-based compensation. USR. Any initiative to increase the cash portion of employee compensation could address these concerns.
A possibility, not a definitive plan
In an email to Insider, Amazon spokesperson August Aldebot-Green confirmed the note’s accuracy. The change in Amazon’s broader salary structure is a possibility, not a definitive plan, and the company’s compensation philosophy “remains unchanged,” Aldebot-Green said.
Amazon has always offered lower base cash compensation than some of its peers. Instead, he used stock awards — and the potential for massive increases in stock price — as a way to attract talent. This strategy worked very well when Amazon shares surged from 2009 through most of 2021. But last year the stock plunged, undermining the value of RSUs as an employee retention tool.
Amazon’s recent decision to reduce the number of RSUs granted to staff marks a major reversal from 2022. That year, the company issued a record number of stock awards, as Insider previously reported. . In 2022, it disclosed $19.6 billion in stock-based compensation, up 54% from the previous year and more than double the 2020 level. Other tech companies also issued million more shares last year as the market slumped, a trend some analysts have noted. as “completely unsustainable”. Investors often complain when companies issue a lot of new stock because their share of future earnings is diluted.
In the recent note to managers, Amazon added that the change gives “more flexibility to potentially adjust” the compensation structure in 2025.
“This change in final outlook year gives us more flexibility to potentially adjust the base and equity mix when we revise this outlook year during the next compensation cycle,” the note said.
Employees want more base salary
The potential change to the salary structure could solve the frustration of Amazon employees. Departing staff often cited low base cash salaries as the main reason for leaving, according to an internal document seen by Insider and people familiar with the matter. The current approach to compensation has become a major issue in recent years, leading to increased revenue and causing Amazon to identify it as one of the factors it must address to become the “Best Employer”. of Earth,” as Insider previously reported.
An internal survey last year found employees preferred a higher base salary, according to people familiar with the matter. Employees place a higher value on a package consisting of 75% cash and 25% equity, compared to those with a lower cash component, they said.
To address some of those concerns, Amazon last year increased the base salary cap to $350,000, more than double the previous cap of $160,000. Still, many employees remained unhappy with their lack of pay raises.
Amazon has long used RSUs to align incentives. An internal directive, seen by Insider, tells Amazon officials to emphasize the importance of “ownership” and “long-term” thinking if employees ask about the company’s salary structure. “We reinforce this commitment to ownership through the structure of our total compensation program. Our shares vest over time and reflect the importance of maintaining ownership by taking a long-term view of performance and success. “, did he declare.
For now, Amazon appears to be moving cautiously with 2025 stock prices. An employee compensation statement seen by Insider shows the 2025 stock award space has remained empty, a sign that some RSU plans have not not yet been finalized.
Still, Amazon seems optimistic about its stock’s future performance. In the employee compensation statement, Amazon continues to propose an assumed 15% share price increase for 2024 and 2025.
Do you work at Amazon? Do you have any advice?
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