What Amazon's Pay Cap Increase Means to the Tech Pro Job MarketWhat Amazon's Pay Cap Increase Means to the Tech Pro Job Market
Amazon more than doubled its pay cap for tech and corporate workers to $360K a year. Here's what it means and how smaller companies can compete for skilled talent against the high compensation offered by tech giants like Amazon, Google, and Microsoft.
February 16, 2022
In a sign of the times, last week Amazon raised the maximum base pay for its tech and corporate employees to $350,000, more than doubling it from its previous cap of $160,000. But what does that really mean for tech workers at Amazon and elsewhere? Will it drive other tech giants to raise their rates for tech employees, too? And how can small and mid-sized companies compete for skilled technology pros against deep-pocketed companies like Amazon, Google, and Microsoft?
Technology salaries, along with other salaries and wages, have headed higher in recent months as businesses compete to hire the workers they need.
“It’s a strong employment market,” says Marc Cenedella, founder and CEO of Ladders, a job networking site for positions that pay $100,000-plus. “Companies are investing. There’s a lot of capital available for doing new things. We’re probably looking at two to three-plus years at this type of strong candidate market.”
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That’s because everyone is hiring, but the available population of candidates is constricted and constrained compared to the past, according to Cenedella.
“All that feeds into a sense of comfort that I can keep my job and do great, or I can change my job and do even better,” he says.
What About Amazon’s Pay Cap Increase?
Cenedella says Amazon’s pay cap increase for corporate and tech employees is no surprise because the Amazon salary cap was so low to begin with compared with what its competitors pay for corporate and tech workers. Highly skilled or executive employees would typically take a pay cut to go work for Amazon, and Amazon would say it was making up the pay difference with equity in the company. There’s also a certain cachet to having Amazon on your resume, too. But in this market that is favoring candidates, cash is still better than equity. Although Amazon needed to make the change, Amazon’s maximum cap is still lower than the salaries paid by competitors for the same jobs.
“By definition, a cap is lower than what the market would be,” Cenedella says.
Also, be assured that Amazon has “such a unique and quirky compensation practice, that change won’t set any trends for the rest of the market,” he says.
Competing for Talent Against the Tech Giants
For companies looking to compete for skilled talent in this market of high pay tiers set by tech giants, you may decide that it doesn’t make sense for your organization to match those salaries.
“Not every organization can be as competitive with a salary as a large Fortune 500 company,” says Ellen Jones, director of account management at custom software development and tech recruiting firm Soltech. Small- and mid-sized companies may consider what else they can offer to candidates beyond higher pay -- such as unique benefits or remote work options.
Many organizations will start off looking for a senior-level engineer, but once they look at the market and the financial commitment required for that, they may shift their outreach efforts to more junior-level candidates who they can train, and maybe look to contractors to fill the immediate need, according to Jones.
Stephanie Lovell, marketing director of Hirect, a job marketplace app for startups, says that many companies that can’t compete on salary are getting creative with their job offers by including specialized benefits such as free meals or meal stipends for remote workers.
For instance, she’s seen some companies provide $30 per day Grubhub packages for their workers.
Allowing Remote Work Is a Big Advantage
Startups are also benefiting from the desire of some workers to stay remote at a time when big companies are making noise about timelines for a mandatory return to the office.
“Since companies are moving towards a remote work environment, there’s a lot less overhead in terms of office spaces and supplies and equipment,” Lovell says. “Those funds are now being redistributed into these creative compensation packages and incentives for employees.”
Lovell recently hired someone for her own team who is joining Hirect from Amazon.
“The reason he is changing jobs is that they are going back to the office,” she says. “Since COVID happened, he relocated across the country and now he doesn’t want to move back to California just to go back to the office.”
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