"If They Don't Raise Wages, I'll Join Competitors"... US Big Tech Employees Also Complain "Compensation Is Low" [Wage 4.0 Era]

[Wage 4.0 Era]② Global Big Tech Companies Like Google, Amazon, and Netflix Also Struggling with Wage Issues

[Asia Economy Reporters Nahum Kang, Seungjin Lee] Even global big tech companies such as Google, Amazon, and Netflix, which offer world-class treatment, salaries, and career guarantees, are struggling with wage issues. When employees move to companies that offer slightly higher salaries, wages naturally rise to fill the vacancies. Complaints continue about huge salaries and bonuses being concentrated among some CEOs. While the proportion of compensation based on job roles and positions is increasing within total wages, focusing on "rewarding where there is performance," the gap remains significant.

Comparisons of wages with competitors in the same industry are also a headache. Especially in recent years, although big tech companies’ performance has surged dramatically, the rate of increase in wages and bonuses has not kept pace, leading to growing voices from younger employees saying "the compensation is too low." On top of that, the demand for ICT personnel such as developers and designers has surged, and cases of wage increases as if competing with each other are also increasing.

If employees at competing companies doing similar work receive higher wages, they do not hesitate to resign and move to places that pay more. Therefore, many companies are revamping their performance evaluation systems and raising base salaries to offer higher pay than competitors. Since one of the biggest concerns for employees is competitor wages, these companies continue their efforts to prevent talent outflow.

Global IT Industry: Only 3 out of 10 Say "I Will Stay at My Current Company"

According to a survey conducted by market research firm Gartner in the fourth quarter of last year targeting 18,000 people across 40 countries worldwide, only 29% of IT industry workers said they intended to stay at their current job. This means 7 out of 10 are considering quitting or changing jobs.

In particular, salary issues are cited as the biggest factor encouraging this trend of resignation and job change. Even global big tech companies, known as "dream workplaces" for their reputation of paying high salaries, are no exception. In a survey Google conducted earlier this year among its employees, the company’s compensation system, including salary and bonuses, received the lowest scores. Only 46% of Google employees responded that "Google’s compensation is competitive compared to similar jobs at other companies."

At Google, individual goal setting and performance management have been conducted frequently. During evaluations, about seven or more employees per employee are required to write detailed evaluation reports. Several times a year, the bottom 5% of employees are identified and notified. If work efficiency remains poor, transfer to another department is recommended, and if inefficiency continues, the employee is removed from the company. Naturally, good performance is rewarded accordingly.

This performance- and job-based wage system also has the side effect of creating excessive wage gaps. Google employees’ dissatisfaction stems from this. Excessive wage disparities based on performance motivate only a few who receive higher pay, while the majority who do not may experience lowered morale.

According to the annual "Executive Compensation Watch Report" published by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) in July last year, CEOs of companies included in the S&P 500 index received an average compensation of $15.5 million (about 17.8 billion KRW) in 2020. Meanwhile, regular employees received $43,512 (about 49 million KRW). While CEOs’ pay increased by more than $260,000 (about 290 million KRW) annually over the past decade, regular employees’ pay increased by only $957 (about 1 million KRW) per year on average. The wage gap between CEOs and employees reached 299 times.

At a Google employee video conference held in March, complaints about low salaries erupted. When asked, "Why do you think satisfaction with pay dropped the most compared to last year?" Brett Hill, Google’s Vice President of Total Compensation, replied, "The current hiring market is very competitive, and you probably have heard of colleagues receiving better offers from other companies. People seem to feel the impact of inflation in their daily lives," showing signs of discomfort.

Fierce Competition for Salary Increases

Considering these employee complaints, Google has decided to reform its performance evaluation system and raise salaries. It will introduce a new employee evaluation system called GRAD (Google Reviews And Development), limiting evaluations from twice a year to once a year, and streamlining the process by placing more responsibility on managers rather than heavily weighting peer reviews.

In the previous evaluation system, group evaluations by managers and peers were important factors for promotion, but in the new system, executive judgment plays a major role. Also, the lengthy forms requiring evaluations from supervisors and peers when applying for promotion will be eliminated. Google expects that with these changes, the majority of its employees will receive higher pay than under the previous evaluation system.

Not only Google but other big tech companies are also entering the salary increase competition to secure and retain top-tier developers. Netflix has promised to pay industry-leading salaries. It plans to estimate the highest compensation each employee could receive at competitors and set the highest amount among them. The company also decided not to propose salary cuts to employees even if it faces financial difficulties.

However, Netflix’s policy is tied to employee performance. Poor performance leads to immediate restructuring. Netflix laid off about 150 employees, roughly 2% of its U.S. headquarters staff, including many senior positions. Netflix explained this was due to company-wide cost-cutting needs, not individual performance, but the industry views that truly high-performing employees would not have been laid off.

Among global big tech companies, Amazon, known for its relatively low salaries, plans to significantly raise base salaries this year for some groups such as developers and headquarters office workers. The base salary cap of $160,000 will be raised to $350,000, more than double. Since signing bonuses and restricted stock units are also included, the actual payout is expected to increase further. Amazon stated, "The 2021 labor market was especially competitive, and we thoroughly analyzed various options. Considering the economic feasibility of the business and the importance of retaining excellent talent, we decided to raise compensation levels significantly more than usual."

[Wage 4.0 Era]

① "Why do executives get more bonuses?"... Wage conflicts turn into generational conflicts

② "If you don’t raise wages, I’ll go to competitors"... US big tech employees also complain "compensation is low"

③ "10-year to 20-year, wages rise sharply" Deep-rooted seniority system... History of Korea’s wage system

④ "Introducing job-based pay, reforming wage system based on productivity"

(Illustration by Seongsu Oh gujasik@asiae.co.kr, Infographic by Jinkyung Lee leejeen@asiae.co.kr)