Amazon's 401(k) Plan Is Pretty Brutal, Too

http://www.bloomberg.com/news/articles/2015-08-24/amazon-s-401-k-plan-is-pretty-brutal-too-idpw28hz

by m_haggar • 11 years ago

125 141 11 years ago

Amazon workers who join full time must stay for three years before they vest in the company match. Leave after two years and 11 months? You're out of luck.

While Amazon's policy does seem incredibly limited, this particular jab makes no sense. Three years is the point at which you can begin contributing. So if your hypothetical worker survived that extra month and made it to three years instead of 2 years 11 months, he'd only get an employer contribution match on one month's paycheck.

jayess• 11 years ago

This sort of vesting schedule is pretty common. I'm not sure busting Amazon's balls on this one is very genuine.

icefox• 11 years ago

The match of employee contributions into their 401(k) plans is below average and made entirely in Amazon stock, which leaves employees dangerously exposed to the company's fortunes.

How about this other aspect of their 401k plan? I have never worked at a company that does that. Being so closely tied to your place of work financially is usually not recommended.

LoSboccacc• 11 years ago

Yeah this is only relevant as news if the implementing company also has an habit of firing people at the 34 month mark.

I mean, it does suck, but it is what one sign for, so no amount complaining later will change that

rdtsc4• 11 years ago

Is it? I worked for 3 companies. 2 allowed matching right away, other gave a % of the salary every year, but you couldn't contribute yourself.

gorena• 11 years ago

All employers should have their "balls busted", whenever possible.

Demand more.

s73v3r4• 11 years ago

I would say busting anyone's balls over that one is genuine. Especially because it sounds like their competition in hiring doesn't do that.

ZenoArrow• 11 years ago

I'm surprised it's not common, is that just for particular industries or for most US employers?

delecti8• 11 years ago

You can begin contributing to your own 401k immediately upon starting. They begin matching immediately as well, but you lose that match when you leave if you aren't vested.

Source: am an Amazon employee

TwiztidK• 11 years ago

Does the match partially vest over those 3 years, or is all or nothing?

moron4hire6• 11 years ago

These sorts of vesting rules are extremely common for 401(k)s. It's why I don't include such things in trying to figure a "total compensation package" when considering a new job. It's either money in your hand or it's not. A lot can happen in 3 years.

ruraljuror• 11 years ago

So you are saying employees can't contribute to their 401(K) until after 3 years of employment, but then are fully vested?That doesn't sound right. How do you know this?

LordKano2• 11 years ago

If what you describe is accurate, I agree with you.

It's just that what you describe sounds different than what most companies do.

My employer has a three year vesting period too but they begin contributing on day 1. Until you reach your 3 year anniversary, the only part of your account that you're entitled to is the part that came from your contribution.

givehimagun• 11 years ago

It's the same policy at General Motors. 3 years and if you leave before, you're out all your matched money.

serge2k8• 11 years ago

Why is Amazon being compared to GM?

What's the policy at MS, Facebook, Google, Apple, etc... ?

wfo• 11 years ago

The other thing to note is that much like a warranty designed to cover your machine up until a month before it's expected to fail, the hell they unleash on their employees means most don't make it to 3 years so for most of them vesting doesn't meaningfully exist and it's just a lie told to entice potential new victims.

pm246012• 11 years ago

Agreed: per the article:

"There's evidence that lower-paid workers aren't widely participating in Amazon's 401(k) plan—and that creates a problem for high earners at the online retailer. For a plan to maintain its tax status, it can't disproportionately benefit what the IRS calls "highly compensated employees." A lack of participation by the rank and file means higher-paid employees can't max out their contributions to the IRS limit and may even get some of their planned savings back. Every year since at least 2011, Amazon has had to repay amounts "withheld and contributed to the Plan that exceeded the amounts allowed under the Code," according to the company's 2013 regulatory filing for its 401(k) plan. This year, it repaid more than $5 million in excess contributions made in 2014. For employees, that can mean paying more income tax and filing an amended tax return."

potatolicious• 11 years ago

Yep, every aspect of Amazon's compensation packages are designed to either not pay out, or keep employees involuntarily.

Their RSUs vest at an exponential rate, rather than the linear vesting that's standard in industry. You vest only 5% in your first year, 15% in your second year, and 40% each in years 3 and 4.

Tellingly, Amazon's median engineering tenure is 18 months - you tell me this vesting schedule wasn't designed with that in mind ;)

Ditto, Amazon's signing bonuses are usually structured with a 2-year clawback. I'm not sure if this is an attempt to increase the median tenure or avoid paying out - or maybe a bit of both.

seattle_spring• 11 years ago

This is not how 401k matching or vesting works.

edgyswingset• 11 years ago

Can an Amazon employee confirm this?

The chart Bloomberg has shows the old 401k plan for Microsoft. The new one would put it near the top instead of near the bottom.

mabbo2• 11 years ago

At the Canadian office, I get 3% match in RRSPs from day 1, and not (afaik) in Amazon stock. I think after a few years, it goes to 4%. Not sure if they'll claw any of it back if I leave. Probably.

breischl• 11 years ago

Oh my gawd, a 2% match? Doesn't that violate some UN human rights convention?! </s>

It's reasonable to compare their comp package to their competitors, especially if you're considering working there. But calling the tax-advantaged retirement plan that gives you free money "brutal" is just whinging.

omouse• 11 years ago

I get a 5% match with a group RRSP at work and I'm at a small non-profit company. Most tech companies don't even offer an RRSP in Canada.

TylerE• 11 years ago

That's surprising. Here in the US non-profits aren't allowed to match at all.

eternalban3• 11 years ago

Love to know the actual reason for this coordinated attack on Amazon. What's about Seattle based software companies and irritated established interests? /(a big) wink

eternalban3• 11 years ago

Instead of downvoting you may want to reflect on the fact that an actual story [1] got buried in 'Tech' section of the paper of record and the hear-say attack piece on Amazon went straight to front page. Front page of NYTimes is a very (very) politically hot space, don't you think? /another big wink ;)

[1] http://www.nytimes.com/2014/03/01/technology/engineers-alleg...

spacecowboy_lon2• 11 years ago

Sometimes one company becomes the whiping boy for the bad behavior of the majority - and if your hitting major publishers where it hurts its a good idea not to give them any ammunition.

Amazon just have to hope that Rupert Murdoch doesn't go after them

Someone1234• 11 years ago

There have been whisperings about Amazon's work culture for many years. I know I've read complaints from tech employees on social media for the longest time. I've also seen several articles about their warehouse employees and what they go through.

I think the reason you're seeing so many articles about it recently is that there is "blood in the water." And people love to bandwagon in the media in general, but in tech media especially.

I do think Amazon's work culture deserves some discussion, but will agree that at some point there is only so much you can say about it before you have to move on. Bringing up the 401K in particular just seems like a "me too!" article, with nothing specific to add to the discussion (i.e. this could have been a footnote in a full article on the topic).

The CEO (and other executives) coming out and saying "everything is wonderful at Amazon, I never see anyone upset!" (paraphrasing) only added fuel to the fire as it seemed so totally out of touch almost to the point of being laughable. That's what turned this from a small fire into a raging one (plus they love to try and humble CEOs).

outside1234• 11 years ago

I think Amazon is the source of this attack on Amazon. :)

rdtsc4• 11 years ago

Love to know the actual reason for this coordinated attack on Amazon.

Going out on a limb here -- because it has a pretty bad work environment compared to other similar companies?

philiphodgen• 11 years ago

One reason for the attacks on Amazon: they are coming from the New York Times.

Jeff Bezos owns the Washington Post -- a significant competitor to the NYT.

The NYT is in the happy position of damaging a competitor while generating clicks.

It's personal, in other words.

meatysnapper• 11 years ago

Amazon is widely recognized to have a horrible work culture. Microsoft, for all its evils, does not (or at least didn't, before stack ranking). I know a bunch of people from both places, and the latter group was much happier. Tellingly, when the Microsofties got sick of their work, none of them left for Amazon. None of them.

serge2k8• 11 years ago

People are jumping on because it's a hot topic right now.

A few years ago it was stack ranking at MS.

s73v3r4• 11 years ago

No, it isn't. We're not serfs. If they have shitty benefits, they should be called on it.

LordKano2• 11 years ago

A couple of years ago, I went to an Amazon tech social gathering and rubbed elbows with some of their people.

I wasn't looking for a job, the gathering was 5 minutes from where I work and I knew there would be free food. They were looking for people to relocate to other parts of the country. A lot of H1B people showed up at this event. Since they didn't have any ties to this area, they were a lot more receptive to the idea of moving to the West coast.

I went, ate their food, drank their beer and won the door prize. They asked me if I'd be interested in interviewing, I graciously declined and the more I hear about working there, the happier I am that I declined their interview.

rdtsc4• 11 years ago

I was actually interviewing with them. Had a laughably bad experience talking to one of AWS teams ( https://news.ycombinator.com/item?id=10065631 ). I kept making excuses for them "Oh it is a big company", "Scheduling conflicts happen", "It is ok if they forgot about me during lunch". But now I feel like a dodged a bullet.

odonnellryan2• 11 years ago

I was asked a really crazy question from their AWS SRE team!

Basically, PHD-level question. They knew I was a junior, but they asked me a very high level math problem.

moron4hire6• 11 years ago

I got cold-called through LinkedIn by one of their recruiters. Out of curiosity, I went through with the interview process. I had a number in mind that, if they could match or exceed, would have been worth giving up on all of my current plans and changing coasts. I passed and got an offer, but it wasn't going to be enough to warrant my wife leaving her job and us moving out of the DC suburbs into Seattle. Plus, the benefits package was super confusing, and I generally believe that confusion in paperwork is deliberate obfuscation. So that was a red flag. There was also a lot of stock, which seemed like a really chincy form of "compensation" considering how old the company is now.

There was zero interest on their part to consider taking me as a contractor, taking me as 100% remote, or even taking me in their office in Herndon, VA, which is accessible by train for me (oh yeah, after my car finally broke down after 380k miles, I elected to not replace it, so my wife is the only one with a car right now). I've been leading completely disconnected teams on rather successful projects for years now. I see a lack of willingness to do remote work as a sign that the institution knows they suck at project management. Who wants to work for a company that can't manage projects correctly?

I'm sticking to consulting while using my ample sparetime to build and market product offerings. You will pay a premium for the illusion of stability that working for a megacorp provides. It doesn't cost anywhere near a marginal $100k a year to give me office space and manage benefits. I mean, at that premium, I could hire myself a fulltime secretary and have him or her do a ton of other things for me. Don't get lured into thinking that Amazon or IBM or whomever won't lay you off the second it works better for their shareholders. At least as a consultant I have a contract.

presty• 11 years ago

There was also a lot of stock, which seemed like a really chincy form of "compensation" considering how old the company is now.

er.. how is it a really chincy form of compensation, considering how well amazon's stock has performed?

mtberatwork• 11 years ago

I see a lack of willingness to do remote work as a sign that the institution knows they suck at project management.

That seems a bit anecdotal to me. I'm not sure I would infer poor project management practices solely based on the fact that they wouldn't let you work remote.

You will pay a premium for the illusion of stability that working for a megacorp provides. Don't get lured into thinking that Amazon or IBM or whomever won't lay you off the second it works better for their shareholders. At least as a consultant I have a contract.

I suppose that would depend on how iron-clad of a contract you were able to have them sign? But I wouldn't hesitate for a moments notice to think that mega-corp couldn't easily find a way around an individual consultant's contract if necessary. Consultants are much more easily expendable than FTEs.

morgante• 11 years ago

I see a lack of willingness to do remote work as a sign that the institution knows they suck at project management.

I agree that willingness for remote work is a good sign for a company, but the lack thereof isn't a red flag. Plenty of the big tech companies who are substantially better employers than Amazon also forbid remote work.

smackfu• 11 years ago

Yes, they recruit heavily on LinkedIn regardless of your location, but the jobs are always in Seattle. Mentioning that you won't relocate stops the conversation cold.

delecti8• 11 years ago

This article is technically right but practically speaking incorrect. You are 100% vested after 3 calendar years in which you have worked more than (I believe) 1000 hours.

This means that if you start before about half-way through the year, you will have worked more than 1000 hours that year, then the next year, and will have reached 1000 hours approximately halfway through your third calendar year there.

The end result is that practically speaking, a full-time employee will be 100% vested after no more than about 2.5 years, and possibly as soon as 2 years.

Source: Am an Amazon employee and I've got 401k contribution confirmations wherein my "vested employee match" went from 0% to 100% after working there just over 2 years, having started in mid 2012.

cameldrv• 11 years ago

Better check your math. Assuming you work 2000 hours per year, if you start in June, you vest after 2.5 years. If you start in July, you vest after 3.5 years. 3 years would be the average, and 2 years would be impossible.

delecti8• 11 years ago

I started in July 2012, and I worked at least 1000 hours before the end of 2012, so that counted as a calendar year in which i worked at least 1000 hours. I easily hit 1000 hours in 2013, having worked there the entire year. I hit 1000 hours approximately halfway through 2014, becoming 100% vested after about 2 years of employment.

Maybe my original post was misleading, if you can tell me what you misunderstood then I can edit it to clarify. Regardless, I assure you that I was 100% vested in mid 2014, after roughly 2 full years of employment spanning 3 calendar years.

jsolson7• 11 years ago

The end result is that practically speaking, a full-time employee will be 100% vested after no more than about 2.5 years, and possibly as soon as 2 years.

edit: This is correct under very specific circumstances, which as I call out in my response below strike me as a bunch of horseshit.

Either this is incorrect, has changed, or I got screwed when I left[0].

I worked at Amazon as a full-time software engineer (SDE2 then 3) for a bit over two years, starting January 3rd 2011 and leaving in mid-February 2013. When I left my entire 401k match was revoked.

[0]: I left on good terms as regretted attrition; my manager, sr. manager, director, and VP all asked to be the first person I emailed when I decided to come back (which I doubt I'll ever do, as my new gig is better for me by basically every metric, but it was a nice gesture).

giaour4• 11 years ago

If you left in mid-February 2013, then you did not work 1000 hours in 2013. You need to work at least 1000 hours in three separate calendar years.

xienze2• 11 years ago

If Amazon matched employee retirement contributions in cash, a new employee earning $80,000 a year would get a maximum company contribution of $1,600.

Wow, and I thought IBM was stingy. They at least matched 100% up to 6% (of course, you forfeit all that if you aren't employed on December 15th of that year).

dpark6• 11 years ago

They at least matched 100% up to 6% (of course, you forfeit all that if you aren't employed on December 15th of that year).

That seems like a really shortsighted policy. I expect that would seriously encourage people to leave in January. Having big blocks of people leave all at once seems far worse than having turnover spread more evenly.

xienze2• 11 years ago

IBM is all about short-sighted policies. But yes, people did their best to leave early in the year.

NotABox3• 11 years ago

The difference is that Amazon gives out stock. IBM didn't for software engineers when I was there a few years back. My base salary at Amazon is the same as it was at IBM. However including stock my total compensation at Amazon is 2-3 times what it was at IBM.

spacecowboy_lon2• 11 years ago

Man that sucks a good big company DC plan in the uk matches at 5% from day one - a really good one up to 8-10%.

I am surprised that post Enron that any match in company stock is allowed.

autobahn• 11 years ago

Can someone tell me, what's the actual BENEFIT to working at Amazon? Do people really go there simply because of the name? It doesn't seem like there's any reason for talent to go there as opposed to somewhere else?

impish19• 11 years ago

Just speaking about engineering - I know a bunch of people who work in AWS/Prime Now infra teams. The opportunity to work on services of such massive scale is not something you can ignore. A lot of my friends have helped build a few AWS services from the ground up and the learning experience isn't something you would not appreciate. They definitely do technically challenging things.

jedberg• 11 years ago

The massive scale offers some pretty unique engineering challenges. But not totally unique -- you can get the same challenge at say Facebook or Google (coincidentally now across the street from Amazon HQ from what I hear).

umanwizard4• 11 years ago

From personal experience -- if FB and Google are the big leagues, Amazon is triple-A ball[1]. The caliber of people there is quite high, but it's still easier to get in than at the truly elite places. I don't think there are a lot of people with offers from Google working at Amazon, but Amazon can be a good stepping stone.

[1]: (Non-Americans, substitute something like "Premier League" and "whatever league the Premier League relegates to")

nostrebored2• 11 years ago

I actually know a number of people working for Amazon that had comparable offers from Google and decided to work for Amazon. Admittedly, many of these people made the decision for moral reasons, specifically regarding how Google handles user data.

But as with most of Amazon, I guess a lot of it has to do with the team that you're in.

serge2k8• 11 years ago

That's why so many people are able to jump ship easily for FB and Google.

I think you are seriously overestimating the quality difference between the people at these places.

mabbo2• 11 years ago

I enjoy the domain I'm in, for one thing.

I develop software for within the Amazon fulfillment centers (FCs). I get a lot of opportunities to fly around to various FCs, meet people, improve tools, reduce complexity. I try to make life a bit easier for the folks putting in four 10-hour shifts per week doing actual hard jobs. It's a really interesting environment, and it's the kind of place where 1% improvements are worth millions.

That kind of stuff motivates me.

They've also treated me really well. I started in Seattle, but really wanted to be in Toronto where my then-girlfriend (now wife) was living. A few months later, I'd transferred to a team in the Toronto office. I rarely work more than 45 hours/week, sometimes 50 if it's really bad. Hours are flexible. Good opportunities to learn and grow as well.

It's not a perfect company, but I'm enjoying being here.

NotABox3• 11 years ago

I love working for Amazon. I get to work on extremely interesting problems that have a huge impact on the company's global operations. I rarely work more than 40 hours a week. I don't work on weekends. I am compensated very well. My management shows real concern for my well-being (after my father passed away I was told to take as much time off work as I needed. I returned to work after 10 days, and was immediately asked if I wanted to take more time off.) In contrast to what you hear, most people I work with seem happy to be here.

serge2k8• 11 years ago

You do get paid quite a bit. They are big enough to handle visa stuff (even thought their policies regarding green cards aren't great). If you get the right team it's a good job.

pc86• 11 years ago

It's definitely the worst on this list but my company's is even worse (scored sub-20 on the same survey but not a publicly traded company):

- Must be an employee for 1 calendar year before you can enroll. Only two open enrollment periods so potentially up to 18 months from hire before you can contribute. - 50% match on first 2% - Match is not distributed until end of Q2 the following calendar year. So this year's match will not hit my account until Jul/Aug 2016. This also has the nice secondary effect of making every September hell because nobody quits between January and August. - 100% vesting after 3 years, no vesting prior - Surprisingly, a nice selection of low-fee funds including Vanguard

If the pay here wasn't 30% above market for the area the 401(k) alone would have forced me to decline the offer.

jessaustin• 11 years ago

A non-public company that is so much nicer to more senior people might be one that takes care of execs and high-level managers, and doesn't care about lower-levels for which turnover is high? That is, the 401(k) is designed not to be useful for most of the people working there.

pm246012• 11 years ago

The 401k is a feature not a bug.

Amazon managers abusing the workers in the warehouse is a feature not a bug.

Women not being promoted within Amazon is a feature not a bug.

For Jeff Bezos to claim he didn't know about this is a feature not a bug.

At this point, anyone who thinks that this behavior was all a big mistake really is in denial, or intentionally ignorant (looking at you, Jeff)

Update: Ah, the hate downvotes: I wonder exactly why people wish to downvote?

* Is it because they don't want to believe that Amazon is behaving badly?

* Is it because they think that I am some sort of Amazon hater and they want to punish me?

* Am I inaccurate in some way?

Full disclosure: I am buying Amazon stock, because any company that is this tight with the dollar is figuring out how to extract blood from a turnip. I also use Amazon AWS all the time.

But if you downvote: do the favor and add a comment, and attack me. Personally if you like. Get a little ad hominem rage venting. I don't mind. Just own the downvote.

jaworrom• 11 years ago

Why anyone would invest in a 401k now is beyond me.

parsnips2• 11 years ago

I would think nowish would be the time to get money into equities.

toephu2• 11 years ago

what do you think a 401k does behind the scenes?

jrbancel• 11 years ago

1) Taxes

For example, an average software engineer making $150,000, contributing 10% to her 401k will reduce her taxable income to $135,000. At a 28% marginal tax rate, she will save $4,200 on taxes.

2) Free money

If the employer matches 50% of the contributions, the employee will end up with an additional $7,500 on her 401k account.

3) Very few constraints

It depends on the employer but she could be free to invest the 401k money as she wants. She doesn't have to put it in a specific set of funds.

In a nutshell, she would get $11,700 more than if she hadn't used her 401k and is free to invest as she pleases.

thearn42• 11 years ago

Assuming you're young: far better now than later.

sjg007• 11 years ago

Some places don't even match 401k...

jobu2• 11 years ago

True, but Amazon supposedly rewards their employees well to compensate for the high productivity expectations. The Amazon 401k isn't terrible, but it definitely isn't great. (It's ranked the lowest in the top 50 on the S&P.)

jsolson7• 11 years ago

Amazon's argument, when I was working there from ~2011-2013, was that they had few perks, hard work, but that they paid better than other companies giving employees more freedom to choose what to do with the fruits of their labors.

I don't care for that argument generally (as I personally value my free time well beyond what anyone is willing to compensate me for it -- call it personal utility if you like), but even so, the argument only works if it's actually true. In my experience it is not; Amazon's compensation lags other "Big 5" companies considerably, but some of that lag is hidden in things like their 401k match policy and the delayed stock vesting.

guelo• 11 years ago

I've worked at a bunch of SF tech companies, from small to big, and they all had shitty 401k plans with little or no matching. More common now are big end of year bonuses in cash or RSUs.

thearn42• 11 years ago

The 5% matching contributions for the Thrift Savings Plan (gov't 401k equivalent) is one nice part about being in the fed. Not sure if it balances out the crappy GS payscale (especially for colleagues of mine in high-cost areas like SF Bay), but it's something.

TheBeardKing• 11 years ago

Also the TSP fees are much lower than even Vanguard.

merpnderp2• 11 years ago

That's brutal. My place of work started matching after 90 days (after the introductory probation period), and I was immediately vested.

jobu2• 11 years ago

Is the delayed vesting for 401k a common thing? All the companies I've worked for either had no match, or the match was immediately vested.

merpnderp2• 11 years ago

I've only worked for one place that didn't immediately vest (after a 90 day period) and that was a long time ago and the CEO is currently rotting in jail.

Amazon's 401(k) Plan Is Pretty Brutal, Too

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