Amazon Rewards Employees Who Stay — But Turnover Is Still High
The stock vesting schedule for Amazon employees doesn't necessarily encourage them to stay — but it does limit Amazon's losses if they leave.
A revolving door. Churn and burn. "An overwhelming need for new bodies." These are all phrases that have been used to describe Amazon's high turnover rate and fast-and-loose corporate culture — the first to me by a Seattle-area tech recruiter, the second and third in the New York Times this weekend.
But Amazon employees, like many tech employees, receive options to purchase a certain number of shares in the company in addition to their base salaries. Most companies dole those options out in relatively equivalent portions over the first four years of an individual's employment. Amazon does not, meaning employees who exit the company after a year or two leave a larger chunk of options on the table.
According to multiple people familiar with Amazon's practices, as well as one former Amazon employee's offer letter, 5% of Amazon employees' shares vest in the first year of their employment, 15% in the second year, 40% in their third, and the final 40% in their fourth year. (Other accounts bear this out as well. )
In other words, to take advantage of the compensation package they're offered when accepting a job at Amazon, employees must stay at the company for three full years or more. And if they don't — if they should succumb to the reportedly high-pressure work environment described by the Times — Amazon hasn't invested as much in them as it would with a traditional stock structuring.
Last weekend, in fact, the Times published a highly critical piece, based on interviews with more than 100 current and former employees, about the reportedly grueling work culture at the Seattle-based tech giant. On Sunday night, CEO Jeff Bezos disputed many of the Times' claims, saying that he "didn't recognize" the Amazon detailed in the piece. But that wasn't before a loud, public conversation about the nature of high-pressure jobs was already well underway.
The Times article alleges a punishing corporate environment: long hours, disparaging bosses, high stress, and no time or space to recover, all resulting in uncommonly high employee turnover, which can typically be an enormous expense for a company. And Amazon has taken deliberate steps to structure a stock options package that calibrates for that churn, offering significant financial incentives to those who stay at the company for more than two years.
Despite that significant financial incentive to stay, many employees appear not to. A 2013 survey by the salary analysis site PayScale placed the median employee tenure at one year, 464th out of the Fortune 500. An Amazon representative disputed these numbers, saying that because the company has hired more than 150,000 people since 2010, its tenure rates are naturally low. The representative said also that the company's retention rates are consistent with those in the rest of the industry, though he declined to share those numbers with BuzzFeed News.
But the Times piece quotes multiple current and former Amazon employees describing a "steady exodus" from the company. (The online version of the story is in fact illustrated with a .gif of a revolving door.) One former Amazon employee who spoke to BuzzFeed News was told by human resources during an exit interview that the average tenure at the company is 18 months. Another former employee described "a very high level of attrition" at the company.
Lindsey Thorne, a manager at Seattle tech recruiting firm Greythorn, told BuzzFeed News that, generally speaking, backloading stock options isn't the most effective of employee retention strategies. "Some companies may try to use a vesting period to hold a new employee, but it rarely works," she wrote in an email. "Even in cases of publicly traded companies" — such as Amazon — "the potential payout of waiting for stock to vest won't tie down unhappy employees who are ready to jump ship."