THE AMAZON MEAT GRINDER: Amazon wants their employees to resign.
This might sound counterintuitive, but it’s true.
It turns out that for Amazon, it’s actually beneficial to constantly churn through employees.
This is actually one of the main reasons that Amazon treats their employees so poorly.
Whether it be exposing warehouse workers to safety hazards, making their drivers pee in
bottles, or working tech staff to the bone, Amazon does it all and it looks like their
efforts of creating a terrible working environment are playing out perfectly.
In fact, Amazon’s turnover rate is so high that they measure it on a weekly basis.
Amazon loses approximately 3% of their warehouse workers every single week.
This translates to an annual turnover rate of a 150%.
In other words, Amazon’s entire warehouse workforce is replaced basically every 8 months.
And considering working conditions for these people, this rate is not too surprising, but
why in the world would Amazon want their employees to resign?
They likely spent thousands if not tens of thousands of dollars on recruiting each and
every one of their employees.
And let’s not forget all of the time and resources they spend on onboarding and training
employees.
So, it doesn’t really make sense to sign them on just for 2/3 warehouse workers to
leave in 90 days and their tech workers to leave in 2 years right?
Wrong, it turns out that constantly churning through employees is not only cheaper for
Amazon but substantially more productive.
In fact, Jeff Bezos has gone as far as declaring that a tenured workforce is simply a march
to mediocrity.
As employees become more tenured, they tend to also become more comfortable and more lazy.
So, over the years Amazon has perfected how to attract employees and push employees away
at the same time.
Essentially, they want you to come in with big dreams, work your ass off for 2 years,
realize that no one recognizes your efforts, and then leave so that the next sucker can
come in and do the same thing.
They’ve basically mastered the art of running a cutthroat meatgrinder, so here’s the twisted
economics of Amazon and the downright putrid tactics they use to screw over the employees.
DECEITFUL COMPENSATION: In terms of how Amazon pushes out blue collar
workers, it’s not really rocket science.
They basically create a high pressure high stress environment with lofty targets and
no down time.
But, the way they handle their tech workers is a lot more interesting.
As you know, tech workers demand a pretty lofty salary, so Amazon has to employ some
pretty clever yet disgusting strategies.
Likely the most notable of these strategies is screwing over employees with wonky vesting
periods.
If you’re not familiar with vesting periods, it’s basically how much time you have to
wait until you can cash in on your stock compensation.
Most tech companies operate under a 4 year vesting schedule with stock compensation being
evenly split up across the years.
At Facebook, for example, employees get 25% of their total stock grant every year, with
6.25% being unlocked every quarter.
Google actually takes it to another level in terms of vesting.
They not only front load their stock vesting, but they do vesting on a monthly basis, so
it’s almost like a monthly salary.
Amazon, however, does the exact opposite as they backload their vesting.
Engineers have to wait a full year just for 5% of their stock to vest and another full
year for 15% to vest.
It’s not until the 3rd and 4th years that engineers actually receive 80% of their promised
stock.
This might not sound like a big deal but if you enter Amazon at a relatively senior level,
it really screws you over.
For example, let’s say you have the option to enter Google as an L6 and Amazon as an
L7 which are approximately equal positions.
On paper, both companies pay approximately the same amount, just over $500,000.
Amazon actually pays $30,000 more.
But, if you made your decision based on this bottom line number, you’d be making a mistake,
and here’s why.
This stock grant number of $318,000 is not something that you receive every year, it’s
just an average of what you’ll receive over the next 4 years.
So, Amazon will basically offer you $1.27 million for the next 4 years and it vests
according to this schedule.
The same thing applies to Google, but given that they have a much more fair vesting schedule,
it’s not really to your disadvantage.
In fact, here’s how both jobs breakdown over 4 years.
During year one, Google pays $611,000 while Amazon pays $306,000.
$306,000 is obviously not a bad amount, but it’s only half of Google despite Amazon’s
compensation seeming like it was higher than Google’s.
During year two, Google will pay another $611,000 while Amazon will pay $433,000.
During year three, Google drops to $506,000 while Amazon rockets to $750,000.
And during the last year, Google drops further to $401,000 while Amazon stays constant at
$750.
If you’re wondering why Google’s compensation drops over the years, it’s because they’re
betting the stock price will increase by the time you receive.
So, when you account for stock growth, your compensation should be relatively stable.
Amazon will of course also experience stock growth, so their compensation in the last
two years will likely be over a million, but you can bet, they’re gonna do everything
they can to push you out in the first two years.
THE AXE: Statistically speaking, neither the average
Google nor the average Amazon tech worker reaches 2 years.
The average tenure at Google is 1.9 years while the average tenure at Amazon is 1.84
years.
So, not a big difference in employee retention, but the difference in compensation is night
and day.
Given that Google has monthly vesting, an employee leaving at 1.9 years has actually
vested over 60% of their stock.
An employee at Amazon leaving at 1.84 years, however, won’t have even vested their year
2 stock as they have to finish the year.
So, they’re left with just the 5% that was vested after year 1.
In other words, remember that massive $1.27 million stock grant that Amazon offered when
you join, well, the average Amazonian will only end up receiving a mere $63,000 of this.
Conversely, the average Googler would have received $571,000 worth of their stock compensation.
When you annualize these numbers along with the base salary and bonus, you’ll see that
the Googler was earning an effective salary of $611,000 while the Amazonion was only earning
$274,000, or less than half of what the compensation appeared to be.
Again, you can’t really complain with either of these salaries, but you can see just how
misleading Amazon’s top line number was.
Now, I should note that Amazon sometimes offers a larger cash bonus during year 1 to make
up for some of this gap, but that only goes so far and doesn’t apply to everyone.
Hearing this, you might be saying, why not just stick around 4 years?
Then, you’ll get the full promised amount right?
Well, the reality is that this is extremely difficult due the axe AKA PIPs.
PIPs stands for performance improvement plans and Amazon swears by these.
Through these plans, Amazon ranks all of their employees every year, and then they go ahead
and fire the bottom 10%.
And as you would guess, this policy disproportionately affects new hires and it creates an extremely
toxic work culture.
Basically, all your team members will be trying to backstab you so that they’re not the
ones who are put on a performance improvement plan.
Everyone is trying to survive the 2 year cliff and cash in on the stock compensation that’s
so close yet so far away.
The reality though is that the average employee doesn’t even pass 2 years, but let’s assume
that you’re part of the lucky few who make it through the full 4 years.
Congratulations, you got a big pay day, but now Amazon still wants you to leave.
If you survive the first 4 years, it’s unlikely that they’ll put you on a performance improvement
plan and force you out that way.
But, what they will do is severely nerf your pay and hope that you either leave or stay
and work for substantially lower pay.
Either option is ok with them.
How do they do this you ask?
Well, remember that massive stock grant they offered you when you joined, well, let’s
just say, you ain’t getting that again.
If you’re lucky you may get stock refreshers but that’s usually nothing in comparison
to your compensation in year 3 and 4.
If you were L7, for example, your compensation will drop from nearly a million dollars down
to $300,000.
And you’re expected to maintain the same level of output if you want to continue avoiding
the PIPs.
By this point though, most remaining Amazonions don’t want to put up with this anymore,
so if the PIPs didn’t them, the nerfed pay usually does.
A TURNING TIDE?: If things are so unfair at Amazon though,
why do people still join?
Well, for delivery drivers and warehouse workers, it’s often the only job they’re able to
find.
But, what about the tech workers.
Surely, they’re smart enough to see through these tricks and do their research right?
Well, they are.
Most of them know all about this, but they choose to join anyway because Amazon is oftentimes
the only FAANG job that they were able to land.
Of course, they could go ahead and join a respectable background company like Visa or
Oracle.
But, that won’t make the same impact on their career trajectory that Amazon would.
You see, no tech worker is putting up with all of this to work on Amazon retail.
All the hype for tech workers is to get into AWS or Amazon Web Services.
If you’re not familiar with AWS, they’re the gold standard when it comes to cloud computing
and infrastructure.
AWS holds a marketshare of 41.5% in the cloud computing market which is more than their
main competitors combined.
Microsoft comes in at 29.4% while Google comes in at a measly 2.6%.
As such, everyone in the cloud space is looking for ex AWS employees.
In fact, many job posting will literally list AWS experience as a minimum qualification.
So, many tech workers figure that putting up with Amazon is their best shot at potentially
landing a job at a non abusive FAANG company.
And more times than not, this actually does work out.
Many of the people who leave Amazon after 1.84 years aren’t actually getting fired
through PIP.
Rather, they were offered an opportunity to join Apple or Google’s cloud departments.
And if you want any proof regarding just how badly these people wanna leave Amazon just
look at all the money they’re leaving on the table in year 3 and 4.
Amazon doesn’t take this as an insult though.
They’re happy to be a springboard for other FAANG companies, and at the end of the day,
they’re the ones who get the most labor for the cheapest price.
And within the tech side of Amazon, I don’t think this will be changing anytime soon,
but it may be changing on the blue collar side.
You see, when you’re a small company and you’re churning through a bunch of employees,
it’s not really a big deal.
But, when you’re at Amazon’s size with over a million employees, you actually run
the risk of running out of people to churn through.
And ironically, this is the exact crisis that Amazon has been facing since mid 2021.
According to leaked internal research, Amazon will run out warehouse workers to churn through
by 2024 which at this point is only 8 months away.
A looming recession may give Amazon more time, but sooner or later, they’ll have to confront
the consequences of churning through so many people.
THE STATE OF AMAZON: In the end, the reason Amazon wants their
employees to resign simply comes down to productivity and financials.
They believe that the most productive employees are the ones that have just joined and have
something to prove.
So, they structure all of the compensation plans and corporate performance policies around
milking out these first few years of productivity for as cheap as possible.
Everything from their compensation policy and vesting schedule to performance improvement
plans and work culture is all designed to get engineers to join but not stay for long.
By this point, most engineers are well aware of the harsh reality of Amazon, but Amazon
is able to leverage the reputation of AWS to continue recruiting engineers.
On the warehouse side of things though, they’re up for a massive challenge not too long from
now.
But, only time will tell how they handle this situation and that’s why Amazon wants their
employees to resign.
Did you know about these clever, yet disgusting tactics?
Comment that down below.
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