Snap is moving to change its employee performance bonus system as the company continues to reduce costs amid struggles with profitability.
For many years, Snap employees could receive an annual cash bonus equal to 10% of their base salary after performance reviews. For high performers, this bonus could be doubled, tripled, or even quadrupled.
That bonus system is being done away with this year, the Snapchat parent told workers Monday during a weekly call with CEO Evan Spiegel and other executives, according to two people familiar with the company. The people spoke on condition of anonymity because they're not authorized to speak to the press.
Instead, workers will have the chance at an annual increase to base pay of 5% to 15%. The level of the increase will be based on their performance. In addition, performance reviews will take place quarterly, instead of every six months as they have for several years, the people familiar said.
A company spokesman confirmed the changes, saying: "We are evolving aspects of our compensation program at Snap to further reward top performers and establish a more timely feedback process."
"For the median Snap team member these changes deliver an increase in overall compensation, and for consistent top performers represents a significant raise," the spokesman said. "This new program begins in April, after annual 2022 bonuses are awarded." After this story was published, the spokesman added there is also a "new" opportunity for high performers to get equity grants each quarter, in addition to ongoing annual equity grants already in place.
Despite the potential for a pay raise, the changes aren't sitting well with employees. Many see the bonus replacement as a de facto pay cut, considering that the previous bonus system started at 10% with the potential for double or triple or more that amount.
One worker said the bonus change was "just another thing" on a list of frustrations for people at the company. Though workers expected the possibility of a pay cut after earlier comments from Spiegel, many are also frustrated with the return-to-office mandate of working in office four days a week starting this month. What's more, workers are expecting more layoffs, particularly in light of Snap's disappointing fourth-quarter business performance and future outlook.
"People are worried, and no one trusts the decisions of management anymore," another worker said.
From Snap's perspective, shifting away from a higher cash bonus structure could save it many millions of dollars in operating costs each year, depending on how the base-pay increases are doled out. Spiegel has said he hopes to get the company to "sustainable profitability" in part through a "more focused cost structure," as he noted during fourth-quarter earnings. Snap expects to save $500 million after its mass layoff last year.
Reining in costs is now de rigueur in Big Tech, with nearly every major company from Google to Facebook cutting back on hiring and even conducting layoffs. Moving away from a cash performance bonus, however, is rare, even as guaranteed grants of stock in compensation packages become more costly for companies.
Alongside big grants of company stock, major tech firms have relied on cash bonuses for years to compete with one another on pay and keep workers happy. A performance bonus can range from 5% to 20% of a person's base salary at major tech firms, according to data from the tech-compensation database Levels.fyi. The potential to double or triple it for high performance is a widespread practice. Now, some Snap employees feel they are working harder and for less reward.
One worker wrote in a private message to coworkers seen by Insider that they were "here to collect my paycheck and will leave as soon as the job market picks up."
Are you a Snap employee or someone else with insight to share? Contact Kali Hays at khays@insider.com, on the secure messaging app Signal at 949-280-0267, or through Twitter DM at @hayskali. Reach out using a nonwork device.
