Amazon is overhauling its compensation model to more clearly reward sustained top performance while reducing payouts for some lower performers.

According to internal guidelines obtained by Business Insider, Amazon is revising its compensation structure within pay bands to better recognize and reward long-term high performers.

Employees who earn a "Top Tier" performance rating for four consecutive years will now receive 110% of their pay range, exceeding the usual cap. In contrast, first-time Top Tier recipients will get 70% of their pay band, down from 80% last year.

"This approach ensures a steadier compensation progression," the internal pay guideline said, referring to the company's total compensation target (TCT) metric.

The changes put Amazon in step with other Big Tech giants that are streamlining employee rewards and tightening overall costs. Google has trimmed bonuses and equity for underperformers, Microsoft has introduced stricter review policies, and Meta is actively downsizing its lowest-rated employees.

Amazon's spokesperson told BI that the updated model "better distinguishes" those with consistent excellence.

"As always, employees' contributions drive the outcome of their annual compensation review," Amazon's spokesperson said. "What's different this year is that our approach to compensation changes now better distinguishes between newer high performers and those who have consistently exceeded expectations for their role and level."

'Overall Value' ratings

Amazon's 12-month pay cycle for corporate employees typically starts in April. Most rank-and-file employees receive their pay updates in early April.

Although Amazon considers various factors when determining employee pay, individual performance ratings—internally known as "Overall Value"—are a key driver. Employees are ranked across five performance tiers: Top Tier (TT), Highly Valued 3 (HV3), Highly Valued 2 (HV2), Highly Valued 1 (HV1), and Least Effective (LE).

The internal guidelines say performance "directly impacts" compensation, and the OV ratings are "used to generate the compensation recommendation for each employee."

This year, more weight is being placed on an employee's rating history. For example:

• A jump from HV1 to HV2 now yields 10% of the pay range, down from 20%.
• But someone dropping from HV3 to HV2 still receives 20%, highlighting a greater emphasis on past performance.
• Those who move up to HV3 will get 40% of their pay range, not the 50% previously offered.
• An employee with two years of Top Tier status now gets 90% of their pay band, down from 100%.
• But 3 straight years of Top Tier can now reach 105% of the range. Those who get 4 consecutive years of Top Tiers can get 110% of the range. Previously, it was capped at 100%.
• This year, first-time Top Tier recipients will reach 70% of their pay band, compared to 80% in prior years.

Amazon's pay structure has long sparked internal frustration, partly due to its lack of transparency and the competitive nature of employee rankings, as BI previously reported. Managers are instructed not to share individual OV ratings with employees, leaving staff to infer their performance based on changes in their compensation.

This year's guidelines also said Amazon will continue to run the pilot program that allows employees to take 25% of their new stock awards in cash. Stock compensation has traditionally accounted for a large portion of Amazon's total pay, but it has become less appealing to employees seeking more immediate financial returns.

Despite the recalibration, Amazon says most employees who showed improvement still saw increases this year. The company offers "multiple channels" through which employees can raise concerns about pay, the spokesperson added.

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