Tesla delays another pay adjustment as employees are unhappy with the last bump

Tesla told employees today that it will do another pay adjustment, a second in a few weeks, after employees expressed disappointment with the last one.

But the automaker has now delayed the second pay increase, which is happening amid the CEO, Elon Musk, asking for a historic compensation package.

Tesla recently announced the annual wage increases for employees across the company following annual reviews.

Much has been said about Tesla factory workers getting pay bumps following the auto workers union’s win over the Big Three Automakers, putting more pressure on non-unionized automakers like Tesla.

However, not all Tesla employees have been happy with the pay adjustments.

We noted that Tesla told salaried employees that they won’t be getting their normal stock compensation following their annual reviews.

The pay increase was also less than anticipated for hourly employees amid the high inflation environment.

Tesla employees have reached out to express those concerns.

A Tesla employee told Electrek about the impact of the reduced stock compensation:

This has had a severe impact with morale within the engineers at the company, since the increase in compensation hasn’t made up for the amount inflation as gone up over the last year. There has been significantly more discussions “at the bar” between engineers about compensation than seen in the past. Especially with a lot of high performers leaving for significantly higher pay by going to competitors. This is additional leaving holes in certain groups that haven’t been able to backfill. Newer employees also don’t believe that their current starting equity will have the same explosion that those who have been with the company pre-2019 have seen. 

Apparently, Tesla heard some of those concerns and on January 1st, the company sent an email to employees letting them know that it will do another pay adjustment.

Tesla wrote in that email:

Thank you for sharing your feedback on the recent pay adjustments. We value your feedback and have decided to do another comprehensive review of our variable rate pay bands and the increases that were provided to ensure we get it right. Our goal is to provide market-competitive pay and benefits so we can retain the great, skilled talent we have.

Any adjustments that were already communicated will still go into effect on January 8 and we will update you by January 15 on any additional changes. As always, Tesla is a pay-for-performance company and employees must maintain good performance to be eligible for market adjustments. Thank you for your patience and sharing your feedback with us directly.

However, the January 15 deadline came and employees didn’t receive an updated pay adjustment.

Hourly employees were told that Tesla would need another two weeks to do a “market review”.

Electrek obtained the email sent to employees earlier this week:

It’s important to us that these decisions are made thoughtfully, so we will follow up in the next two weeks with information about what the market review means for you specifically.

This second wave of pay adjustments at Tesla comes amid the CEO, Elon Musk, himself discussing his own potential new compensation package.

But the CEO is using a negotiation tactic akin to a union threatening a strike, which is ironic considering he is hoping to keep unions away from Tesla.

Musk said that he wants 25% voting power at Tesla, which would require him to roughly double his number of shares in the company. If that doesn’t happen, the CEO said that he would prefer building AI products at his new startup xAI.

The threat is especially problematic as the CEO describes Tesla as an AI/robotics company and even said that Tesla is worth nothing if it doesn’t solve the AI problem with self-driving.

Electrek’s Take

As a Tesla fan, one of my biggest concerns has always been talent retention. Tesla is what it is today, the biggest driving force in the electric revolution, because of the incredible talent at the company.

That’s why it is super frustrating to me when Elon Musk supporters claim that Tesla would die without him:

The compensation has been good at Tesla, but that’s mostly due to stock options and the performance of the stock up until 2022.

The company also had the benefit of being an extremely mission-driven organization, which generally attracts talent, and had an inspiring leader in Elon Musk.

But now it feels like all these things that attract and retain talent at Tesla are slowly eroding.

Tesla’s stock performance is down. Stock options are down. Employees are not happy with the pay adjustments. The mission is still there, but it feels like the electric revolution is now well on its way. And finally, there’s Musk, who is increasingly polarizing, and he is asking for Tesla to basically give him back the shares he wasted on buying an overpriced Twitter.

Again, I’m not saying Musk doesn’t deserve a new compensation plan, but the way he asked for it by threatening to divert AI product development from Tesla to xAI should be concerning to Tesla shareholders and employees.

It feels like a dark cloud is over Tesla right now.