Shopify rolls out new employee compensation system to recruit, retain talent amid stock slump

Shopify
Flex Comp took effect September 1, following a delay Shopify attributed to regulatory considerations.

Shopify has finally introduced its new compensation system, Flex Comp, which allows Shopify employees to adjust the breakdown of their pay between cash and equity.

The Ottawa-based e-commerce giant has been in the process of overhauling its approach to compensation since earlier this year. The move comes as Shopify has seen its stock price drop sharply from its pandemic high amid the broader tech selloff and return of physical retail. Previously, the amount of cash and equity each Shopify employee received was predetermined. But as the firm’s share price has fallen, so has the value of that equity.

With Flex Comp, Shopify aims to tie its employee compensation to its “mission, not the market or world events.”

With Flex Comp, Shopify aims to tie its employee compensation to its “mission, not the market or world events.” The new pay system enables Shopify staff to choose how much of their compensation they would like to receive in cash, restricted stock units (RSUs), and stock options, based on their individual needs “a few times” per year.

From what BetaKit has learned, some Shopify employees are happy with the changes, citing the flexibility the new compensation structure provides them and the associated pay boosts they have received. Others, posting anonymously on platforms like Glassdoor and Blind, have criticized Shopify’s compensation levels and the rollout speed of its Flex Comp system.

At a May town hall, Shopify employees were told that the compensation overhaul was being delayed to September, which the company attributed to “regulatory” dependencies. BetaKit reported Shopify employees were told hiring would slow in June. Prospective employees expecting written offers had been sounding off on Blind about delays leading up to this point, which some attributed to uncertainty surrounding the company’s new compensation system.

Asked why there was a delay, Shopify chief human resources officer Tia Silas told BetaKit, “Flex Comp was a massive undertaking that needed to be designed with consideration and rigor to meet various legal and regulatory requirements.”

One individual posting on Glassdoor has claimed that some Shopify employees stand to make less money overall through Flex Comp, alleging that the company previously promised that all staff would see at least a small increase. When asked about the latter claim, Shopify did not respond.

RELATED: Shopify’s Q2 2022 growth continues to slow amid changing e-commerce market conditions

According to Silas, “the vast majority” of Shopify employees received pay increases with the rollout of Flex Comp and 91 percent of eligible Shopify employees have enrolled in Flex Comp, which took effect on September 1. When asked whether any employees will be making less as part of the new compensation system, Silas did not say.

“The market-competitive compensation system we’ve implemented will allow us to recruit, reward, and retain the best talent in the world,” said Silas.

Flex Comp will enable employees to take home more cash and less equity, while also permitting them to receive more in RSUs or stock options versus cash, depending on their needs. Shopify has also removed one-year cliffs on equity, ensuring that vesting begins right away, including for new employees. In the future, Shopify says it plans to “add in elements like charitable donations and Shop Cash.”

With Flex Comp, Shopify appears to be following in the footsteps of firms like streaming giant Netflix, which allows its employees to choose how much of their pay they receive in cash versus equity on an annual basis. Shopify is far from the only tech company to adjust its approach to compensation amid current public market conditions. The tech stock slump has led other tech companies to boost compensation and give employees more equity grants or cash in order to attract and retain talent.

RELATED: Shopify employees told hiring will slow at town hall

“We linked our new compensation system tightly to our mission – and as we iterate we’ll bring the two even closer,” wrote Shopify in a blog post announcing the news. “For now, we thank our employees who support that mission when they pick RSUs or options with a 5 percent bonus on any extra equity they choose.”

Shopify’s business boomed during the pandemic amid the rise of online shopping. But the company has seen its stock price drop and revenue growth slow in Q1 and Q2 amid shifting e-commerce market and broader economic conditions.

In July, Shopify laid off 10 percent of its staff—approximately 1,000 employees—citing a misplaced bet on where the future of e-commerce was going post-COVID-19. The company has cut more staff since then. Shopify has also made a number of changes to its senior leadership team during COVID-19, most recently bringing in a new CFO and COO.

Silas emphasized that the layoffs were not related to the Flex Comp system as the compensation change was part of a long term strategy to attract and retain talent. She also noted that Shopify has “no additional workforce reductions planned.”

Feature image courtesy Shopify.

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling and breaking Canadian tech and innovation stories. His coverage is more complete than his moustache.

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