Amazon announced that it was raising minimum wage for all employees to $15 per hour earlier this week, but The Guardian reported that the increase comes with a catch that could end up costing some employees in the long run.
The $15 minimum wage wasn't just a straight wage increase — it was a trade off. In exchange for increasing the minimum amount employees can earn, Amazon also took away incentive pay and stock option awards, which are extremely valuable at a company like Amazon.
"This is basically a stealth tax by the employer on its own wage increase," said Tim Roache, general secretary of the British trade union GMB, according to The Guardian. "If Jeff Bezos — the richest man in the world — really wants to give hardworking staff a pay raise, he should let them keep their share options as well as increasing their hourly rate."
How does it work?
According to The Guardian, warehouse workers previously got an Amazon share worth nearly $2,000 at the end of each year, and an additional share at the end of every five-year period of employment. Employees could also earn up to 8 percent of their monthly income by way of incentive bonuses.
So while employees who were making significantly less than $15 per hour might love the change, those who were making near $15 or more have a different perspective. Here's how an Amazon employee explained it to Yahoo Finance:
An employee earning $15.25 an hour who has worked for Amazon for more than three years in Arizona crunched the numbers. Although he is getting a $1 an hour raise, which would equate to as much as $2,080 in additional pay a year, he said he could have earned a few thousands of dollars more from the incentive programs. “Amazon isn’t giving its employees a raise, they’re taking money from us,” he told Yahoo Finance. “It only looks good if folks don’t know the truth.”
How did Amazon respond?
Amazon claims it made the compensation change based on employee feedback, and that workers preferred the "predictability and immediacy of cash." The company also said everyone will make more money.
"The significant increase in hourly cash wages more than compensates for the phase out of incentive pay and [restrictive stock units]," an Amazon statement read. "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."