When Amazon announced changes last month to attract and retain talent, analysts tended to focus on the big jump in its base salary, from $160,000 to $350,000. But in another change, the company reportedly is also speeding up its stock vesting, which would enable some employees to access the value of their equity holdings much earlier, including in some cases under a monthly vesting schedule. Prior to the change, vesting was back-end-loaded, at a rate of 5% after the first year, 15% after the second and 20% every six months over the next two years.
The more aggressive vesting schedule appears to be part of a trend in which companies, many in the technology sector but not only them, are trying to attract and retain talent by speeding up all forms of compensation, equity as well as salaries.
“Compensation is getting a spotlight, and that’s why you’re seeing a lot more out there, as people try to grapple with what is the right short-term and long-term compensation strategy,” Shelly Holt, HR chief at compensation software company Payscale, told GeekWire.
Under Amazon’s policy shift, corporate and tech employees can earn up to $350,000 before further increases come in the form of equity grants. The previous $160,000 ceiling was reportedly putting the company at a disadvantage attracting and retaining talent despite the high-profile attractiveness of working there.
“By increasing this they will see a big bump in candidate acceptance,” Albert Squiers, a managing director at staffing company Fuel Talent, said in the GeekWire piece.
Other tech giants are doing something similar. Apple, for example, is offering high performing engineers the opportunity to receive $50,000 to $180,000 in restricted stock unit (RSU) grants on an out-of-cycle rather than annual basis.
“These grants are seen as a retention incentive to prevent defections to tech rivals,” says Bruce Brumberg, editor-in-chief of myStockOptions.com, in a Forbes report.
Google is also reportedly increasing and front-loading stock awards. Previously, its RSU grants vested 25% over four years; now they vest 33% per year for the first two years, 22% in the third year, and 12% in the fourth, according to the Forbes report.
“More public companies will be tweaking their vesting schedules in various ways, including moving away from annual vesting to quarterly or monthly,” Brumberg predicts.
Accelerated salary reviews
Accounting and consulting giant Deloitte doesn’t offer employees stock compensation but it’s a high-profile company that’s speeding up its salary increases.
The company typically raises employee salaries once a year, in the summer, according to a Wall Street Journal report. At the end of last year, though, it raised salaries again, resulting in thousands of employees getting a pay increase just six months after their previous one.
“The surprise increases were aimed at keeping Deloitte’s pay competitive in a labor market where wages were rising quickly," Deloitte’s U.S. chief, Joe Ucuzoglu, told the Journal.
Industrial ceramics company CoorsTek Inc. is another that’s using accelerated pay increases to give it a labor market edge, mainly for in-demand production operators and mechanics, the Journal reported. Instead of reviewing performance annually, the company is doing it each quarter, a change that led to a 10% increase in compensation costs last year over and above its standard 3% increase.
Part of the reason for the acceleration in pay reviews is to ensure existing employees don’t feel slighted when the company brings on new people at the higher salary levels today’s tight market is demanding.
“It wants to ensure that the experience of existing employees, who may have been hired in a less-competitive job market, is rewarded appropriately,” the Journal reported.
But the quarterly reviews also have another benefit: if market pressures soften and pay levels ease, the company can quickly adjust salary changes to reflect the new reality rather than wait for an annual review.
“If it slows down, the last thing you want to do is overspend at the beginning of the year,” Irma Lockridge, the company's HR chief, told the Journal.
Although they’re gaining attention, accelerated pay increases are still a rarity.
In a survey early in the year by Mercer, a consulting firm, only 6% of HR heads said they’re conducting pay reviews two times or more a year, but that could increase, the Journal reported, if competitive conditions persist. Almost 25% said they were considering accelerating pay reviews and another 20% said they were prepared to review the idea this year if necessary.