Amazon's Minimum Wage Hike Comes With Cuts To Other Compensation

Managers at an Amazon fulfillment center probably thought they would be leading a celebration when they explained the company’s new pay scheme to employees on Tuesday.

Instead, some workers turned angry, convinced their take-home pay would go down.

The world’s largest online retailer announced Tuesday that starting in November, all its workers would receive at least $15 per hour a key demand of labor advocates and Sen. Bernie Sanders (I-Vt.), who had been trashing the company for its pay practices all year.

But Amazon is making other changes to employees’ compensation to help pay for the new wage floor in its fulfillment centers. Those changes include getting rid of what’s known as the “variable compensation program,” or VCP, which is based on a worker’s attendance and his facility’s production level, and eliminating a stock allotment program for certain employees.

“You guys are taking VCP away!” shouted one worker during a Q&A session following a presentation about the raises. HuffPost obtained a secretly recorded video of the presentation from a source who said the video is from a facility in Arizona.

Speaking into a microphone, a manager tried to assure the roomful of workers that everyone would be better off.

“Please, please understand, you will all see a benefit from this ... Please be patient,” the manager urged as workers talked over him.

An Amazon spokesperson said in an email that despite the cuts to the bonus and stock programs, all hourly workers would still come out ahead.

“The significant increase in hourly cash wages more than compensates for the phase out of incentive pay and [restricted stock units],” the spokesperson wrote. “We can confirm that all hourly Operations and Customer Service employees will see an increase in their total compensation as a result of this announcement.”

Workers already earning more than $15 per hour will be receiving dollar raises so everyone sees some kind of hourly pay hike. But several of those workers told HuffPost they have a hard time seeing how their pay will go up, considering the other changes. 

One Amazon fulfillment center worker said he pulled down around $2,000 in pay through the variable compensation program over the course of a year. Losing that money, he said, would basically negate the dollar-per-hour raise he’s expecting through the new program. (A 40-hour workweek translates to 2080 hours per year.)

Taking the loss of restricted stock units into account, he suspects he will have less annual take-home pay than before.

“I don’t come out ahead,” said the employee, who asked not to be named in order to speak freely. “It seems like the same pile of money, they’re just moving it around.”

An employee in Florida said that as a new hire, he was glad to get a raise, but that some of his longer-tenured colleagues feared they would lose out.

“Associates are torn,” he said.

The worker said the company awarded one share of restricted stock to employees after they’d worked at the company for a year, with the stock vesting a year later, meaning employees could then sell the stock for cash. One share of Amazon stock as of Wednesday afternoon is worth nearly $2,000.

The worker said the VCP program had amounted to 8 percent of his pay each month.

The tradeoff should be a good thing on the whole for many employees. As in many workplaces, a lot of Amazon workers don’t stick around long enough for their stock to vest, making it a benefit only on paper. In a high-turnover environment, workers might prefer cash wages to stock, depending on the latter’s value.

“The net effect of this change and the new higher cash compensation is significantly more total compensation for employees, without any vesting requirements, and with more predictability,” the company said in a press release Tuesday .

Amazon’s announcement of its new wage floor followed weeks of harsh criticism from Sanders, who said it was a disgrace that Amazon CEO Jeff Bezos the world’s richest man, according to Forbes paid his workers so little that some qualified for government programs like Medicaid and food stamps.

Sanders pilloried Bezos in interviews and even in legislation , introducing a bill called The Stop BEZOS Act.

The minimum wage announcement brought Amazon and Bezos glowing news coverage and even the plaudits of Vermont’s most famous democratic socialist.