Amazon Adjusts Pay Structure to Reward Consistent High Performers More Generously

Amazon is revamping its pay structure to place a greater emphasis on rewarding consistently high-performing employees, while reducing payouts for those with lower performance ratings. According to internal guidelines obtained by Business Insider, the company is adjusting the compensation bands within its Total Compensation Target (TCT) metric to better acknowledge long-term excellence. Under the new system, employees who maintain a "Top Tier" (TT) performance rating for four consecutive years will now receive up to 110% of their pay range, surpassing the previous cap. However, first-time recipients of the TT rating will see their compensation drop to 70% of their pay band, compared to 80% last year. This revision aims to create a more balanced and steady progression of rewards, aligning with the company's goal to "better distinguish" between newer high performers and those who have consistently excelled. "This approach ensures a steadier compensation progression based on an employee's performance history," the internal guidelines noted. The changes reflect a broader trend among major tech companies to streamline employee rewards and manage costs more effectively. For instance, Google has reduced bonuses and equity for underperformers, Microsoft has implemented stricter performance reviews, and Meta is letting go of its least effective employees. Amazon’s compensation model is heavily influenced by "Overall Value" (OV) ratings, which assess employee performance across five tiers: Top Tier (TT), Highly Valued 3 (HV3), Highly Valued 2 (HV2), Highly Valued 1 (HV1), and Least Effective (LE). These ratings directly impact annual compensation, and the company is placing increased importance on historical performance data this year. Despite the emphasis on performance, Amazon acknowledges that its pay structure has often been a source of frustration for employees, partly due to its opaque nature and highly competitive ranking system. Managers are advised not to disclose individual OV ratings, leading many employees to gauge their performance based on changes in their compensation alone. To address some of these concerns, Amazon continues to run a pilot program allowing employees to receive 25% of their new stock awards in cash. While stock compensation has historically been a significant part of Amazon's pay package, employee preferences have shifted toward more immediate financial rewards. The company emphasizes that despite these adjustments, most employees who demonstrated improvement still received pay increases this year. Amazon provides multiple channels for employees to voice any concerns about their compensation, including direct communication with managers and human resources. For tips or information, individuals can contact Business Insider reporter via email at ekim@businessinsider.com or through secure messaging apps like Signal, Telegram, and WhatsApp at 650-942-3061. It is recommended to use a personal email address and a non-work device for such communications to ensure privacy and security.