When I wrote about turning down an AWS job offer I had a whole bunch of people ranging from “multiple VPs” to “remarkably senior managers / engineers / contributors” to “aggrieved ex-employees” all come out of the woodwork to explain their perspective as to how AWS approaches paying people. I’ve been keeping notes on everything I’ve learned here for a while.
Around January each year, Amazon begins adjusting compensation as part of their annual performance cycle. In celebration of a new year, let’s dig into what this means for AWS employees.
AWS’s philosophy of compensation
This applies to all of Amazon, but I’m going to focus on the AWS segment because it avoids a whole mess of “other stuff” that applies to folks working in fulfillment centers, such as contract delivery drivers, etc.
I want to be very clear that this is oriented to technically-involved roles–namely, Software Engineers, Solutions Architects, TAMs, and the like. I’m sure that Product Managers, the sales folks, senior executives, etc. all have differing compensation models. I have no particular insight into those facets, but I suspect there may be valuable nuggets for them tucked away here.
I’d further like to say that this is what I’ve pieced together from a variety of public postings from folks sharing their compensation. I may have failed to capture a nuance or two. I’m thrilled to update this post if there’s a meaningful departure from reality. Remember, I’ve never worked at AWS because for all their faults, they do have hiring standards.
Consider how AWS views itself. From their worldview, you’re joining AWS because the stock is going to grow the most, you’ll get to work with people you have decided are the best–if you work at AWS and hate your coworkers, you’re welcome to Disagree and Commit with that statement–and you will get more job options because of it.
From where I sit as an AWS outsider, they’re largely correct. Furthermore, there’s nothing wrong with this viewpoint. “We’re career poison!” isn’t how most companies view themselves, and even the ones that should manage to soldier on anyway. It aligns incentives! As a result, AWS is built to pay people the most when Amazon stock goes up.
There’s also an argument that the company is REALLY good at optimizing for free cash flow and should therefore pay as little cash to people as possible, opting instead to make stockholders pay for employees. Nobody can argue that this model hasn’t done great things for Amazon/AWS employees who have ridden the stock up. Today it’s worth over six times what it was worth five years ago!
Let me just forewarn you: don’t try to argue with the people who have benefitted and are True Believers™; they’re too busy yelling at me on Twitter about this article to listen to you argue anyway. If you find yourself vehemently disagreeing with aspects of this post, great; I welcome your email! I’m building all of this by piecing together a whole lot of public trivia.
You are here
So you want to change the world—or at least operate at the kind of scale where the things you work on resonate globally. “I know!” you exclaim, and apply to work at AWS. You pass the ritualistic hazing known as “the interview loop” and your recruiter reaches out to you four days past their internal SLA for getting back to candidates with a job offer.
“Congratulations, AWS is a great place to work!” I’m serious, that’s what they say when they extend an offer. It’s the same energy as when I write “Congratulations!” on my wife‘s Valentine’s Day card, and roughly as appropriate.
AWS believes that you’re a big winner here. AWS hires The Best, and if a member of The Best has decided to offer you a role, you might be The Best too; that’ll be determined by whether you accept the role or not.
It’s your shot at greatness; you will gain oh so very much more than mere money by working at AWS. You’ll learn to do things the AWS way, making you incredibly valuable to other companies when you eventually leave. That’s compensation that can’t be taxed!
How Amazon builds your offer
The AWS goal is to pay you roughly 50% to 65% of what “the market” will pay you, based upon a variety of sources plus some work with Excel. That comes with some caveats which I’ll address in a moment.
Remember that the “market rate” is often defined by big-name organizations and varies as you move from one to the next. Companies like Google, Microsoft, Snowflake, Databricks, and other brand-name successes might have really deep pockets, but that doesn’t apply to the entire tech market. I assure you, if you peruse the levels.fyi entries for lesser-known companies, you’ll find that the “market rate” number is lower than you might expect. A few conversations with other companies put Microsoft at around 75% of market, Google at 95% of market, and Netflix at “top of market.” Seriously, if cash compensation is all you value, you want to talk to either Netflix or a finance company.
As a result, many people find themselves receiving an offer from AWS that is… underwhelming. When they come back with a politely worded form of “Really? You’re trying to pay me less than I make now or was offered at other places?”
AWS has no problem responding with “Yes, that’s right; if you want that better money you should take it.” Many smart people do, and many of them don’t; no judgement here. (As an aside, I maintain that the best way to negotiate a big tech company offer is via reaching out to Josh Doody and tell him I sent you. I would hire him if I were contemplating working at a big tech company myself, no question.)
Now, this gets a lot more complicated, but it’s initial target compensation.No employee gets paid more than the minimal amount of cash. In Seattle or other “non-premium markets” that means $160k. In SF and NY—the “premium markets”—that can get to $185k. International compensation gets super weird due to labor law issues with which I’m not fully versed; if this doesn’t apply to your non-U.S. market, take it as a failure on my part. I’m US-centric with respect to labor protections (read as: we basically have none).
Given that their equity is backloaded, or doesn’t vest significantly until the employee’s third year of employment, there’s also frequently a cash signing bonus that vests over the first two years. Pay attention to this; it’s the first and last cash bonus you’ll get from Amazon. The rest is all stock compensation.
Wait, stock-based compensation?
That’s right: Past that initial $160k, you’re getting stock only. I have checked: you can’t use stock to pay for fancy dinners, your kid’s private school, or your third yacht. You’ll need to sell shares to afford a lifestyle that demands more than this.
How much stock you get will vary based upon role, negotiating position, when you joined, and a number of other factors. But baked into that stock grant is the assumption that your stock grant will grow 15% per year as per Amazon’s own admission in a SEC proxy declaration.
Seriously. You will get your offer and the interesting parts will all be in shares.
Talk to other Amazonians about their share grants and when they joined. Over the years, the number of shares decreases year-over-year because they’re building that 15% growth number into the stock.
Now, I don’t mean to make assumptions around where you are in your career. But think for a minute about what getting a stock grant that assumes 15% growth implies.
If you could take a job at Microsoft, Google, Netflix, or another company that doesn’t do this, you would get an offer that doesn’t have this growth assumption baked in. If you genuinely believe as an article of faith that AMZN will go up 15%, you could objectively make more money taking an alternate offer and just investing all of your income into AMZN.
Since they pay top dollar, why not work for Netflix instead? You can spend your days solving complex, impactful challenges and invest whatever extra income you get from this decision in AMZN. It’s the best of both worlds: You’ll end up with the same amount of disposable cash—and almost certainly more shares of Amazon stock.
That’s a great investment hedge, since your personal career trajectory and your investments will no longer be linked to the same company doing well!
From an “optimizing for the most money” perspective, you can even do the math as to whether or not you have sufficient investment funds to invest assuming AMZN +15%—and not even take the job.
I’m an Engineer / PM / Crap Service Namer, not an investor!
Let’s assume you take an AWS job for any number of reasons. It’s truly a great place to work, with amazing people and also whoever named ‘AWS Trainium.’ And you chose to get paid a lower salary than other places you could have worked, so clearly you know what you’re doing.
Let’s now get into your next “reward season” that your recruiter and manager absolutely didn’t tell you existed.
First, understand that your first year and some of your second year is likely to be all cash compensation because they “backload” their stock vesting. Your first year, 5% of your stock grant vests. In year two, 15% of your grant vests. This… is generally not a lot of money, so that shortfall is made up via a cash signing bonus that vests throughout this period.
When you get hired, there is a “cash compensation target.” From what I can tell, that’s determined jointly by recruiting, HR, and your manager. That’s what you’re really negotiating when you mistakenly think you’re negotiating other things. It really is the sole thing that determines your pay for the near-term future.
And remember, no matter what you end up with, it’ll be lower compared to salaries for peer roles at other companies!
The next year it will be the salary, the stock that you’ve been awarded after 12 months, and then the remainder of the two-year cash signing bonus. Then in year three, that will turn into just your salary and the stock award.
I want to point out here that Amazon stock has been growing like gangbusters; anyone who’s joined in the past decade has seen well over 15% annual stock growth, which is great. That said, it’s also not something you can actively plan on when choosing a role; past performance does not indicate future behavior and the stock market does not reliably go up-and-to-the-right.
Second, if you started after some date in early January of 2021, you will not be eligible for new rewards in 2022 because you haven’t been there for a full year. Surprise! Your recruiter certainly did NOT tell you this part! Raises are tied to calendar years—not “years of service.”
Third, let’s imagine that you’re an Amazonian who’s still in your initial offer timeline or have grants that lay over into your current timeframe. Let’s say the stock has gone up over 15% just before the discussion, such as what happened in 2020; COVID-19 was an unexpected bonus to Amazon’s comp model. Let’s further say you have been the top-performing person on your team—and you know it.
CONGRATS! You are going to go into a meeting with your manager. Your manager will say something that distills down to:
“Thanks for coming! You are great! We love you! I can’t tell you your rating (note: this is rumored to no longer be true for 2021, which is a good thing), but did I say we love you? We love you! And congrats, you are making more than we meant to give you when we first hired you. Congrats some more, you can keep that! Wait, you thought I was going to give you more stock? More salary? A bonus (ha—those aren’t really a thing here)? No. Congrats once again! You’re getting paid more than we meant to pay you! The stock has done well—way better than we expected. Here’s a list of our entire executive team’s email addresses should you wish to send them polite thank-you notes. Now, get the hell out of my office and send in the next Crap Service Namer please.”
That’s right, your comp isn’t being adjusted one iota, regardless of whether you’re the top performer on your team or incredibly close to being placed on a PIP / dismissed. (Note that there are scattered reports of top performers being given some kind of equity refresh, but invariably it’s relatively paltry compared to their expectations.)
Fourth, right around year three or so, AWS decides whether they want to retain you or not. That’s a somewhat harsh description of what’s being done. But, fundamentally, when you get more stock grants and they resemble a six-figure pay cut, they’re sending you a message—and it’s not the friendly kind.
Conversely, if you get a pile of stock that makes you feel awesome, that’s them signaling that they’d really prefer you stick around. If this is you—and the stock growth blew past your expectations (including that 15% growth that was baked in)—I’d encourage you to remember that this was a happy accident of employee retention.
If AWS really wants you gone, they have alternate processes for that.
So I shouldn’t join AWS?
All this said, should you sign aboard with AWS? The answer is a strong maybe!
Will you work with great people, push the envelope, be paid well in the grand scheme of things, and learn a lot? Probably!
But it will greatly depend upon which team and which people you work with. There are jerks and losers at every big company. Some folks love their time at AWS while others hate it.
My advice is this: Take the role if and only if it benefits what you’re really looking for. Will you get to work with people you think are the best on the problems that interest you the most? Take the job! Otherwise, make sure you think through the decision long and hard, as there are many variables to consider—just like there are with most things in life.
Now, in true Amazonian fashion, let’s address a FAQ that several of the early reviewers of this article asked me.
“Wait, what the hell do you mean by ‘they’re trying to get me to leave voluntarily in year three?!’”
Great question. I knew that would get some interest!
By the start of your third year at AWS, you’ll know if you’re “in” or “out.” The pattern generally looks like this:
- Year 1: You’re learning the equivalent of “where the bathrooms are.” Nothing is really expected of you past the usual “perform at your job.”
- Year 2: It’s time to see what you’re made of. AWS will generally load you up in scope to prove your worth to them.
- Year 3: They’re telling you what they learned in year two. It’s either a “yes you’re here and one of us” or it’s a “no, we expect you to leave after four years.”
I want to be very clear: Some of my close Amazonian friends will be hurt by this blunt assessment as they look back at their own career trajectory over many years at AWS.
That’s not by design. It’s a dawning realization that I’ve come to based upon dozens of conversations held over years with Amazonians about their compensation.
It’s my hope that these words will help you determine whether working at AWS makes sense for you—or whether you’re more keen on getting a salary that reflects what you’re actually worth.