Amazon announced last week that it is raising minimum wage for US and UK employees, but Nomura Instinet analysts say the pay hike comes at a cost.
“This was not all roses as Amazon is eliminating restricted stock options and monthly incentive bonuses for hourly employees,” a team of Instinet analysts led by Simeon Siegel said in a note sent out to clients on Monday.
Siegel noted that, prior to the hike, Amazon’s US fulfillment center employees earned an average hourly wage more than $15 when including stock and incentive bonus. And so, these employees will actually “lose out” after the new wage change.
Amazon explained its decision to phase its restricted stock unit program citing hourly employees preferred the “predictability and immediacy of cash to RSUs,”or restricted stock units, and mentioned that the company is “phasing out the incentive pay component.”
By Siegel’s calculation, the wage increase – spanning full-time, part-time, temporary, and temporary agency employees in the US and UK- could drive $1.3 billion to $2.7 billion of incremental expenses. But the plan to phase its restricted stock units and variable compensations could save Amazon $900 million. Therefore, after excluding savings by eliminating benefits, Amazon could see a net cost of $400 million-$1.9 billion, suggesting only 15-70 basis point of deleverage, Siegel said.
By Siegel’s calculation, the wage increase – spanning full-time, part-time, temporary, and temporary agency employees in the US and UK- could drive $1.3 billion to $2.7 billion of incremental expenses. But the plan to phase its restricted stock units and variable compensations could save Amazon $900 million. Therefore, after excluding savings by eliminating benefits, Amazon could see a net cost of $400 million-$1.9 billion, suggesting only 15-70 basis point of deleverage, Siegel said.
Source: Business Insider
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