11 ms·

The RSU vesting schedule at Amazon is nonstandard but it's not an issue. You may only vest 5% of your RSUs in your first year, but everyone is given a significa

The RSU vesting schedule at Amazon is nonstandard but it's not an issue. You may only vest 5% of your RSUs in your first year, but everyone is given a significant monthly cash bonus to make up for it. The compensation strategy at Amazon is that you always make the same "target compensation" each year, even your first. You aren't shortchanged just because you vest less RSUs in your first year. An example with numbers: someone in their third year at Amazon makes $150k/yr salary + $150k/yr RSU vests, for $300k/yr total. In comparison, someone in the same position in their first year at Amazon makes $150k/yr salary, but only makes $30k/yr RSU vests, for $180k/yr total. That seems shitty, right? Except the person in their first year also gets a $120k/yr cash bonus, bringing them up to the same $300k/yr.

erehweb 5y ago
So why do they do it?
nomendos 5y ago
Thanks for explaining extra info. Is this the norm in Amazon to equalize total compensation with cash bonuses?
ToxicMegacolon 5y ago
Since we are talking numbers, I am gonna do some hypothetical calculation. Lets assume two employees A and B, their numbers are as follows: A - $150k Salary + $150k RSU -> TOTAL = $300k B - $150k Salary + $30k RSU + $120k cash bonus -> TOTAL = $300k Also lets assume the year is 2017, specifically around Oct 2017 when AMZN price was ~$1000 ($1002 on Oct 13 2017) With a price of $1000, A gets 150 RSU Units and B gets 30 RSU Units Price of A's RSU on Nov 3 2021 - $3384 * 150 = $507,600 Price of B's RSU on Nov 3 2021 - $3384 * 30 = $101,520 Difference (A - B) = $406,080 You can say that share prices can go down, and then B's 120k cash bonus looks good. But that hasn't really been the case with Amazon. In fact, Amazon is so sure of their stock price going up that they by default include a 15% yoy increase when doing year end compensation reviews. Furthering this hypothetical calculation, if B had also had an offer from Google with the following numbers: $150k Salary + $100k RSU + $0 Bonus = Total $250k [Obviously B took Amazon's offer over Google's because of 50k difference] As per GOOG price on Oct 13 2017, B would have received $100,000 / $989 = ~101 RSU On Nov 3 2021, B's RSUs are worth = $2,935.80 * 101 = ~$296,515 Even after taking an offer that is $50,000 less, the cash bonus would still have been insufficient. There are also other policies at Amazon which would have affected B's total compensation. For example, - Amazon's 401k match policy is 50% match on the first 4% of base salary and Match vests only after 3 years. Amazon's base salary in Seattle is also capped at $160k. So max 401k match is $3200. Given the vesting schedule, Total 401k match received after 3 years = $9600 - Google on the other hand matches 50% of your contributions up to the IRS limit per calendar year. That is $9750. There is no 401k vesting at Google, so Total 401k match received after 3 years = $29250 All this is of course very simplistic calculations and a job has 100 other factors that are important (scope, team etc) but I would not call this "not an issue" like you said in your comments. Please correct me if the calculations are wrong, but it looks like (4 years ago) taking a lower offer at Google seems like a better idea than Amazon.
- awsthro00945 5y ago
  Your math seems right, but again you're neglecting the $120k cash bonus in your calculations. >Price of A's RSU on Nov 3 2021 - $3384 * 150 = $507,600 Price of B's RSU on Nov 3 2021 - $3384 * 30 = $101,520 This is the correct price of the RSUs, but again, neglects the cash bonus. If you look at it (more correctly) through the lens of "the amount of compensation given", the price of A's RSU+bonus is $507k, and the price of B's RSU+bonus is $221k (your $101k + the $120k cash). But! There's no reason that the $120k cash just has to stay cash forever. If you're considering the stock appreciation of the RSUs, you also have to consider the appreciation of what you can do with the cash. For example, if you're one of the Amazonians that just gets the cash bonus all paid up front, then you just take the $120k and buy 120 AMZN stocks to go along with the 30 you were granted as RSUs, and you end up with the exact same 150 stocks ($507k) at the end of 4 years. There's no difference. If you get paid the cash bonus monthly instead of up front, then you would come out a little behind since you can buy less AMZN shares as time goes on, but not as drastically as your numbers make it look.
  - ToxicMegacolon 5y ago
    > This is the correct price of the RSUs, but again, neglects the cash bonus. If you look at it (more correctly) through the lens of "the amount of compensation given", the price of A's RSU+bonus is $507k, and the price of B's RSU+bonus is $221k (your $101k + the $120k cash). The difference is still almost ~$300k. Almost 1 extra year's income. > But! There's no reason that the $120k cash just has to stay cash forever. This is obviously a very simple scenario. There is obviously an assumption here that neither A nor B does any extra investing on the side and just hold onto whatever Amazon has paid them. Individual investment into the stock market is a whole different can of worms. B could just invest that $120k cash in one of the r/wallstreetbets and lose it all. On the other hand, A could cash out all AMZN vests and invest that in TSLA. The scenarios become endlessly complicated if we consider side investments in individual stocks. I think, despite being grossly simplistic, this calculation may provide an interesting insight into why AMZN prefers to delay significant stock vesting for its employees, especially when other similar companies don't. Especially given the fact that avg. tenure at AWS (as per linkedin) seems to be 1.6 years. So a large number of AWS employees may not be receiving 80% of their stocks.

erehweb 5y ago

So why do they do it?

nomendos 5y ago

Thanks for explaining extra info. Is this the norm in Amazon to equalize total compensation with cash bonuses?

ToxicMegacolon 5y ago

Since we are talking numbers, I am gonna do some hypothetical calculation. Lets assume two employees A and B, their numbers are as follows: A - $150k Salary + $150k RSU -> TOTAL = $300k B - $150k Salary + $30k RSU + $120k cash bonus -> TOTAL = $300k Also lets assume the year is 2017, specifically around Oct 2017 when AMZN price was ~$1000 ($1002 on Oct 13 2017) With a price of $1000, A gets 150 RSU Units and B gets 30 RSU Units Price of A's RSU on Nov 3 2021 - $3384 * 150 = $507,600 Price of B's RSU on Nov 3 2021 - $3384 * 30 = $101,520 Difference (A - B) = $406,080 You can say that share prices can go down, and then B's 120k cash bonus looks good. But that hasn't really been the case with Amazon. In fact, Amazon is so sure of their stock price going up that they by default include a 15% yoy increase when doing year end compensation reviews. Furthering this hypothetical calculation, if B had also had an offer from Google with the following numbers: $150k Salary + $100k RSU + $0 Bonus = Total $250k [Obviously B took Amazon's offer over Google's because of 50k difference] As per GOOG price on Oct 13 2017, B would have received $100,000 / $989 = ~101 RSU On Nov 3 2021, B's RSUs are worth = $2,935.80 * 101 = ~$296,515 Even after taking an offer that is $50,000 less, the cash bonus would still have been insufficient. There are also other policies at Amazon which would have affected B's total compensation. For example, - Amazon's 401k match policy is 50% match on the first 4% of base salary and Match vests only after 3 years. Amazon's base salary in Seattle is also capped at $160k. So max 401k match is $3200. Given the vesting schedule, Total 401k match received after 3 years = $9600 - Google on the other hand matches 50% of your contributions up to the IRS limit per calendar year. That is $9750. There is no 401k vesting at Google, so Total 401k match received after 3 years = $29250 All this is of course very simplistic calculations and a job has 100 other factors that are important (scope, team etc) but I would not call this "not an issue" like you said in your comments. Please correct me if the calculations are wrong, but it looks like (4 years ago) taking a lower offer at Google seems like a better idea than Amazon.

awsthro00945 5y ago
Your math seems right, but again you're neglecting the $120k cash bonus in your calculations. >Price of A's RSU on Nov 3 2021 - $3384 * 150 = $507,600 Price of B's RSU on Nov 3 2021 - $3384 * 30 = $101,520 This is the correct price of the RSUs, but again, neglects the cash bonus. If you look at it (more correctly) through the lens of "the amount of compensation given", the price of A's RSU+bonus is $507k, and the price of B's RSU+bonus is $221k (your $101k + the $120k cash). But! There's no reason that the $120k cash just has to stay cash forever. If you're considering the stock appreciation of the RSUs, you also have to consider the appreciation of what you can do with the cash. For example, if you're one of the Amazonians that just gets the cash bonus all paid up front, then you just take the $120k and buy 120 AMZN stocks to go along with the 30 you were granted as RSUs, and you end up with the exact same 150 stocks ($507k) at the end of 4 years. There's no difference. If you get paid the cash bonus monthly instead of up front, then you would come out a little behind since you can buy less AMZN shares as time goes on, but not as drastically as your numbers make it look.
- ToxicMegacolon 5y ago
  > This is the correct price of the RSUs, but again, neglects the cash bonus. If you look at it (more correctly) through the lens of "the amount of compensation given", the price of A's RSU+bonus is $507k, and the price of B's RSU+bonus is $221k (your $101k + the $120k cash). The difference is still almost ~$300k. Almost 1 extra year's income. > But! There's no reason that the $120k cash just has to stay cash forever. This is obviously a very simple scenario. There is obviously an assumption here that neither A nor B does any extra investing on the side and just hold onto whatever Amazon has paid them. Individual investment into the stock market is a whole different can of worms. B could just invest that $120k cash in one of the r/wallstreetbets and lose it all. On the other hand, A could cash out all AMZN vests and invest that in TSLA. The scenarios become endlessly complicated if we consider side investments in individual stocks. I think, despite being grossly simplistic, this calculation may provide an interesting insight into why AMZN prefers to delay significant stock vesting for its employees, especially when other similar companies don't. Especially given the fact that avg. tenure at AWS (as per linkedin) seems to be 1.6 years. So a large number of AWS employees may not be receiving 80% of their stocks.