Google Adjusts Compensation Structure to Boost High Performance and Reward Top Contributors

Google is revamping its compensation structure to boost employee performance and create a more competitive environment, according to an internal communication sent by John Casey, the company's vice president of global compensation and benefits. The announcement comes as part of Google’s efforts to maintain and even accelerate its recent momentum, which has been evident in high-profile events like the launch of Gemini 2.5 Pro and the Cloud Next conference. In the new system, Google will alter the way it assigns performance ratings, giving more employees the chance to achieve the “Outstanding Impact” (O) rating, which is second only to the “Transformative Impact” (T) designation. This adjustment aims to ensure that more high-performing staff can receive significant financial incentives. Under the previous system, the majority of employees fell into the “Significant Impact” (SI) category, which is one step below O, while the T rating was reserved for a select few who demonstrated exceptional achievement. Casey explained in the email that the shift will enable managers to reward more high achievers. Specifically, the company will increase the discretionary budget available to managers, allowing them to offer larger bonuses and equity awards to those who earn the SI rating. However, to make these changes budget-neutral, the financial incentives for those with SI and “Moderate Impact” (MI) ratings will be slightly reduced. Despite the adjustments, achieving a SI rating will still result in bonuses exceeding the target set for each employee. Google’s spokesperson, Courtenay Mencini, emphasized the company’s commitment to rewarding top performers and maintaining its competitive edge. The move is designed to align with broader trends in the tech industry, where companies like Microsoft and Meta are implementing similar strategies to enhance efficiency and motivate employees. For instance, Microsoft recently introduced new policies to intensify performance pressure, and Meta announced a 5% workforce reduction focused on underperformers in January. At Google, the changes will take effect for the end-of-year reviews and for the 2026 compensation planning cycle. The goal is to create a clearer pathway for employees to reach higher performance levels and to provide more substantial rewards for those who do. The company believes that by rewarding top performers more generously, it can drive innovation and excellence, ultimately leading to better products and services. Casey outlined the new process in detail: "As recent moments like the Gemini 2.5 Pro launch and Cloud Next have shown, there's incredible momentum across the company right now — it's so exciting to see Googlers pull together to deliver on our ambitious product roadmaps. High performance is more important than ever to achieve the goals we've set, and so we're making some changes to further reward top contributors, in all teams across the company." Key points of the new compensation strategy include: 1. Increased O Rating: More employees will now have the opportunity to receive the O rating, which will lead to higher bonuses and equity awards based on the O's individual multiplier for the 2026 compensation cycle. 2. Enhanced Discretionary Budget: Managers will receive a larger discretionary budget to reward employees within the SI rating, giving them more flexibility to recognize outstanding contributions. 3. Reduced Bonuses for Lower Ratings: To balance the budget, bonuses and equity for the SI and MI ratings will be slightly reduced, though achieving a SI rating will still result in bonuses above target levels. These changes reflect Google’s ongoing efforts to stay ahead in a highly competitive market. By incentivizing higher performance, the company aims to foster a culture of excellence and innovation. According to industry insiders, this move is a strategic response to the pressures of the tech sector, where rapid technological advancements and intense competition require continuous improvement and high productivity from employees. The shift also underscores Google's commitment to maintaining a robust and competitive compensation package, even as it reallocates resources to reward top performers more generously. Google, founded in 1998 and headquartered in Mountain View, California, is one of the world’s leading technology companies, known for its search engine, online advertising, cloud computing, and various hardware and software products. The company’s reputation for innovative and employee-centric practices makes this move particularly noteworthy, as it signals a new focus on performance-driven growth. Despite concerns about potential impacts on employee morale, the industry generally views this as a positive step to ensure Google remains a top contender in the global tech landscape.