There has been considerable publicity regarding Amazon’s “The Offer” program. CBS did a story on it. CBS reports that “Amazon said it got the idea from Zappos.com” This relation to Zappos’s “offer” is well documented, as is Amazon’s 2009 purchase of Zappos. But Amazon’s “The Offer” is related to Zappos’s “The Offer” in idea and name only. To say that Amazon’s pay to quit program were inspired by Zappos’s would be misleading.
Zappos made “The Offer” to new employees in the first weeks of employment. Zappos’s “The Offer” indicated a long-term investment in employees and extended an open, sincere hand of trust. Zappos’s early philosophy made the highest customer satisfaction and the highest employee satisfaction interdependent goals. “Zappos executives set long-term goals for 2010: achieve $1 billion in sales and receive inclusion on Fortune’s list of The Best Companies to Work For.” No such wording regarding employee satisfaction exists in Amazon’s Leadership Principles, Global Work Tenets, or mission statements. Amazon’s philosophy reverses Zappos’s: The highest customer satisfaction necessitates a difficult work environment with stressed employees.
Amazon extends “The Offer” to Tier One employees once a year, right after peak season. Workers with one or more years of service are eligible. During this post-peak period, the company probably has an excess of temporary workers ready to replace any outgoing, seasoned full-time workers who might take “The Offer.”
Amazon offers the employee a small payment to leave and never come back to any Amazon facility or subsidiary, even as a temp through Integrity or other channels. Accepting “The Offer” ends employment eligibility with the company forever. When I mention this aspect of “The Offer” to friends or coworkers, the reaction is almost universal, “That’s cold.”
The payment is $2000 for one to two years of service (marked by number of peaks worked), $3000 for three, $4000 for four, $5000 for five or more. These payments are taxed at a much higher rate than regular income, particularly relative to Amazon Tier One employee tax brackets–I believe at almost half. For the one or two year employee, the net payment would amount to about two week’s pay. “The Offer” is widely understood by Amazon employees to be a “bad deal.” I know one employee who took “The Offer” and regrets it. He said the payment after taxes was minimal, and he can never work for Amazon, even as a temp during peak. This particular employee, incidentally, was an amazing worker with rates off the charts.
It appears that Amazon accomplishes two goals with “The Offer.” It removes inveterate employees whom the company might consider a liability and an unnecessary expense so it can replace them with fresh new-hires at starting wage with no tenure regarding benefits. It saves the company money in stock payouts, 401k payouts, regular and overtime pay, vacation pay, VCP payments, other benefits. In this way, “The Offer” payout is quickly recovered, and what remains is all savings to the company.
Amazon saves money at any time when an employee accepts “The Offer.” But there seems to be an optimum target employee-attrition-date-range for the company to achieve the greatest benefit–possibly around one and a half to three years. I’ll use myself as an example:
“The Offer” will next be available to me in February 2017. I will have been with the company for around two and a half years and will have worked through three peaks–2014, 2015, 2016. Having worked through three peaks, I will be eligible for a $3,000 gross payment from Amazon in early February 2017 to quit and never return to any Amazon subsidiary, as stipulated by the rules of “The Offer.” If I were to accept this deal, how much will the company save?
Amazon has a 4% company 401k match program that is zero vested until three years of continuous service, when it becomes fully vested. A conservative estimate of that company match portion of my 401k vesting in 2017 will be $1,500. The company will never pay this portion if I take “The Offer” in February 2017. The above mentioned four restricted stock units I received on 4/2/15 set to vest on 7/1/17 will be forfeited, as well as any future stock payouts. At a conservative price of $750, this will save the company a gross stock payout of $3,000 in 2017. At the current pay scale, my wages for 2017 will be $13.00 per hour, and $13.50 starting in August. ($13.50 is topped-out at SDF8.) The starting wage of for a new-hire who will replace me is $12.00 per hour, and $12.25 after six months. By replacing me with a new-hire, Amazon SDF8 will save conservatively $2,000 in regular-hour pay, and conservatively, $150 in overtime pay in 2017. These figures combine for a conservative estimate of $6,650. Subtract Amazon’s $3,000 gross “The Offer” payout it will have made to me in early February, and the net savings to the company for 2017 if I accept “The Offer” would conservatively be $3,650. This figure does not include savings in paid vacation, VCP, or any other soft savings. This figure only includes Amazon’s savings for 2017, not future years. One can see that when Amazon replaces seasoned workers with new-hires, it saves the company a lot of money. If the company churns employees, continually replacing its workforce with new-hires, and in turn, employing those new-hires for limited tenures and then replacing them, it’s a labor windfall.
(Addendum: Amazon SDF8 announced the results of its “annual wage survey” during the September 2016 All hands meeting. The pay scale was unchanged for new-hires and employees with under one year of service. Employees with over one year of service received a small raise ranging from $.25 per hour to $.90 per hour. So, the starting wage remains $12.00 per hour, and the topped-out wage [for three years of service] is now $14.40 per hour. This new pay scale increases the company’s labor attrition savings and continues Amazon’s strategy of offering future rewards to employees who will not be here. By forming a collective bargaining unit [a union], hourly employees can negotiate their wages with Amazon, rather than relying on the company’s “annual wage survey.”)
“The Offer” is a way of getting rid of higher paid employees with stock set to vest, etc., and getting rid of burned-out employees, the inevitable condition of employees in the Amazon fulfillment center work environment. It twists the spirit of Zappos’s offer into a cost effective way of removing long-term employees.
The company announces “The Offer” each year in stand-up meetings, inSTALLments, All hands meetings, etc. In the January 18, 2016 (week 3) inSTALLments, it gives this explanation:
“Amazon offers a unique program called The Offer, designed to ensure that we employ individuals who share our customer-centric philosophy, and who are committed to improving all aspects of the Amazon customer experience. . . . ”
The above statement appears to be a watered down version of the “best interests” language prohibited by the National Labor Relations Board Agreement, and indicates to me that the company is not letting up from this language. It says: If you don’t agree with the company, the company doesn’t want you here.
The philosophy of customer-centrism dictates that low wages, harsh working conditions, employee manipulation, and short tenure are essential to the highest standards of customer service. The employee is asked to commit to a philosophy of her own instability.
Further down in the same inSTALLments explanation, the company lists the payout amounts per peaks worked. One employee added his own message to the inSTALLments flyer posted in the men’s bathroom with black pen. Beside each amount, he wrote, “1/2,” and beside that, he wrote, “Don’t forget about telling them about the taxes coming out.”