How to Avoid Amazon’s Overstated Employee Raises Glitch

Giving a raise to a hardworking employee is just as exciting as receiving one. However, a recent glitch left Amazon managers having to do the exact opposite. While glitches are rare, they can be costly to your organization. 

Here’s what happened to Amazon, how to avoid making a similar error, and what to do if your organization finds itself in the same situation.

A Costly Glitch for Amazon

A combination of factors recently led Amazon to find itself in hot water with newly promoted employees. According to an internal email to managers, a software program glitch resulted in the corporation overstating employee raise packages. The glitch was caused by relying on older, higher stock prices that inflated bonuses. The result of this? Managers have to tackle hard conversations with employees to tell them they will receive less compensation than they initially thought. 

While the corporation fixed this error promptly, the damage to employee satisfaction may be irreversible. This glitch comes on the heels of Amazon employees fighting for base pay increases to rival other tech companies, resulting in more than double max base pay.

How to Avoid Overstating Raises

While glitches are not always preventable, especially with software, your organization can take steps to reduce your risk of falling victim to the same situation. If your organization is planning to offer employees raises and using software as a calculation tool, be sure to test-run the software before you rely on it. By running multiple test runs, you significantly decrease the chances of a glitch. 

Another vital step in prevention is effectively communicating and remaining transparent with your employees. If your organization extends compensation raises through specific calculations or stipulations, be sure your employees have access to all these details in an employee handbook or company culture guide. This transparency will allow employees to understand the expectations around a pay raise and refer back to it should they think there is an error.

There’s no formula to completely prevent a glitch within a software. However, your organization can remain one step ahead by revisiting and refreshing procedures and policies before significant periods of promotions and raises.

Preparing Managers for Hard Conversations with Employees

A compensation error can be costly to an organization and result in added stress on managers to have hard conversations with their direct reports. Preparing managers at your organization to initiate and carry out hard conversations with employees will set the manager and employee up for a more successful conversation. 

Hard conversations are often not planned and can happen when least expected. Having year-round training with your managers allows them to keep best practices top of mind and remain prepared for the unexpected. 

When carving time out of a manager’s calendar, it’s essential to maximize the time effectively. Here are a few tips and tricks we use at BerniePortal to make our management training the most effective. 

Finally, if your organization doesn’t have a manager manual, you’re doing it wrong. Developing and maintaining a handbook of standardized processes and best practices is central to any good performance management strategy. Having documentation in one place allows managers to have it handy when needed. At BerniePortal, we call this our manager manual.

Additional Resources

You can stay informed, educated, and up-to-date with important HR topics using BerniePortal’s comprehensive resources:

• BerniePortal Blog—a one-stop-shop for HR industry news
• HR Glossary—featuring the most common HR terms, acronyms, and compliance
• HR Guides—essential pillars, covering an extensive list of comprehensive HR topics
• BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
• HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics