E-commerce dominus Amazon (AMZN) changed how it pays employees to better reward excellence. This will see their payout range increase for workers who earn the highest rank four years in a row from 100% to 110%.
On the flip side of that, workers who receive the highest ranking for the first time will get 70% of their potential payout range, down from the 80% under the previous system. This new pay system rewards employees who consistently perform well while reducing rewards for those who don’t maintain that standard.
Will Amazon’s New Pay System Pay Off?
Amazon’s new pay structure makes sense, and is a step in the right direction to getting better performance out of its employees. However, the company will have to be fair in how it hands out ratings. If top performers feel betrayed by a poor review, it could harm the company in the long-term by lowering employee trust and morale.
Amazon has a long history of employee complaints, mostly from its warehouse workers, who have criticized the company’s culture. This has triggered several Occupational Safety and Health Administration (OSHA) citations against the company for unsafe working conditions, ergonomic hazards and not properly reporting injuries. White-collar workers have also grown weary of the company and its push to return to the office after work-from-home became popular during the pandemic.
Amazon has to be careful with its new pay system, as employee tensions are already high due to its culture and policies. Any more damage and it could become a struggle for the e-commerce leader to retain hard workers and top talent.
Is AMZN Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Amazon is Strong Buy, based on 49 Buy and one Hold ratings over the last three months. With that comes an average price target of $241.40, representing a potential 29.54% upside for AMZN stock.
