Amazon Compensation and Benefits Guide
Amazon’s compensation package is designed to attract top talent in the competitive tech industry. This guide will give you the tools you need to make the most of your compensation and benefits at Amazon.
Key Takeaways
Amazon provides a unique compensation structure with a base salary, sign-on bonuses, and RSUs.
In 2022, Amazon’s base salary cap increased from $160,000 to $350,000, making the company more competitive for senior talent.
Amazon offers comprehensive benefits, including a 401(k), mega backdoor Roth option, and extensive healthcare coverage.
Employees receive up to 20 weeks of paid parental leave, career development programs, and unique perks like employee discounts and refugee support.
Compensation Structure for Amazon Employees
Amazon's compensation structure centers around a four-year model that includes guaranteed cash and stock to incentivize employees. There are three main components to Amazon's compensation structure:
Base salary
Sign-on bonuses
RSUs
Here’s a closer look at each.
Base Salary
The central pillar of your Amazon compensation package is your salary. Amazon's level system helps determine compensation, with each level corresponding to specific roles and responsibilities. The company uses predetermined compensation bands with internal tools that generate offers within specific ranges.
Amazon’s salary structure is based on a four-year model that has remained pretty consistent over the years. As you advance through Amazon's levels, your total compensation increases, but base salary becomes a smaller percentage of your overall package. Higher-level employees will see an increase in variable compensation through RSUs and bonuses.
Previously, Amazon’s base salary cap was $160,000, but in 2022, they raised that cap to $350,000. This allowed Amazon to compete more effectively with other tech giants for senior-level professionals.
Sign-On Bonuses
Many new Amazon employees will receive a year-one and a year-two sign-on bonus. This bonus is paid out with every paycheck, effectively acting as an additional salary for the first two years.
The sign-on bonus structure varies significantly by role and level. Professional employees typically receive bonuses ranging from $15,000 for L4 positions to over $300,000 for senior L6+ roles. The bonus for year one is generally greater than the amount paid in year two, which helps offset the lower equity percentage that vests in year one.
For most professional roles, these bonuses are paid monthly rather than as lump sums. If you decide to leave Amazon, you will keep any monthly bonus payments you’ve received, reducing the risk of clawback.
Restricted Stock Units (RSUs)
RSUs are a significant portion of Amazon's compensation package for employees. Amazon’s vesting schedule is different from most tech companies, with RSUs vesting as follows:
Year 1: 5% of the initial grant vests
Year 2: 15% of the grant vests
Year 3: 40% of the grant vests
Year 4: 40% of the grant vests
By contrast, most companies use a vesting schedule wherein 25% of the RSU grant vests every year. Amazon’s backloaded structure creates lower compensation in the first two years, with 80% vesting in years three and four. The sign-on bonus compensates for this difference, helping to fill in the gaps of the first two years.
Amazon employees often get additional RSU grants on an annual basis, most commonly during their annual review and compensation adjustment (Q1 of each year). These refresher grants typically vest over two years.
Upon vesting, RSUs are considered ordinary income and subject to taxation. Amazon employs a "sell-to-cover" method where a portion of vested shares is sold to cover tax liability. However, this may not fully cover taxes owed, depending on your tax bracket.
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Amazon Retirement and Savings Benefits
In addition to traditional compensation, Amazon provides several powerful tools to help employees grow their wealth and save more for retirement.
Amazon 401(k) Plan
Amazon employees can invest a portion of their salary in the Amazon 401(k), where their money can grow through strategic investments. Amazon even provides a 50% company match on all employee contributions up to 4% of your salary (effectively a 2% match overall).
For 2025, employees can contribute up to $23,500 to their 401(k) accounts ($31,000 for employees aged 50 or older through catch-up contributions). These contributions can be made on a pre-tax or Roth basis.
All employee 401(k) contributions are immediately vested, meaning you have full control over your funds from day one. However, employer matching contributions have a three-year vesting schedule. If you leave the company before the three years are over, you will forfeit your company match. This could mean losing thousands of dollars in retirement savings.
PRO TIP: Amazon's 401(k) plan also allows penalty-free withdrawals under the rule of 55. This allows you to access your retirement funds without the usual 10% penalty if you leave Amazon in or after the year you turn 55. This makes early retirement more practical for many Amazon employees, serving as a bridge until other retirement accounts become accessible.
Mega Backdoor Roth Conversion
The Amazon mega backdoor Roth option is one of the most valuable retirement benefits available. Using this program, employees can contribute after-tax dollars beyond standard 401(k) limits, then convert those funds to a Roth account. This provides several benefits, including:
Increased retirement savings beyond standard limits
No maximum income limits (unlike traditional Roth IRAs)
Tax-free growth on converted funds and tax-free withdrawals in retirement
Tax diversification for retirement income planning
As a high-earning Amazon employee, the mega backdoor Roth program could be the key to kicking your retirement savings into overdrive.
Health and Insurance Benefits
Amazon provides comprehensive health coverage and insurance options to support employee well-being. Most of these benefits apply mainly during your active employment, but some can extend into retirement.
Healthcare Coverage
Amazon offers comprehensive medical, dental, and vision insurance plans, ensuring employees and their families have access to quality healthcare services. These benefits begin on day one for regular full-time employees.
Amazon also offers multiple plan options to meet different needs and budgets, including high-deductible health plans and more traditional coverage options with higher premiums but lower deductibles.
Health Savings Account (HSA)
Amazon employees enrolled in a high-deductible health plan can invest a portion of their income into an HSA. HSAs provide triple tax advantages:
Pre-tax contributions that reduce taxable income
Tax-free growth over time
Tax-free withdrawals for qualified medical expenses
HSAs can be used to supplement your retirement health savings, given their unique tax treatment and ability to invest contributions.
For 2025, you can contribute up to $4,300 as an individual or $8,550 as a family, with an additional $1,000 catch-up contribution if you are over age 55. Amazon also contributes to employee HSAs based on their level and family size.
Flexible Spending Accounts (FSAs)
Amazon offers both healthcare and dependent care FSAs that allow employees to set aside pre-tax dollars for eligible expenses. Unlike an HSA, FSA funds must be spent by the stated deadline to avoid forfeiting savings, though Amazon allows employees to carry over up to $640 of unused Healthcare FSA funds into the next plan year.
For 2025, employees may contribute up to $3,200 to a Healthcare FSA and up to $5,000 to a Dependent Care FSA.
Life Insurance
Amazon provides two times your annual base salary for Basic Life and AD&D insurance to employees at no cost. Additional coverage is available for purchase, up to 10 times your annual salary, with a maximum benefit of $2 million.
Amazon also offers life insurance options for spouses and children up to age 26, providing additional financial protection for families. However, Amazon's life insurance policies are not portable, meaning coverage ends when you leave the company.
Family and Work-Life Benefits
Amazon offers work-life balance benefits to support employees through major life events and career development.
Parental Leave
Amazon offers up to 20 weeks of paid leave to birthing mothers, and six weeks for adoptive parents. This comprehensive parental leave policy places Amazon among the leaders for family benefits in the tech industry.
Amazon's Leave Share program allows employees to give six weeks of paid parental leave to a spouse or partner if their job does not provide paid leave. The Ramp Back program also offers parents eight consecutive weeks of flexibility and partial work hours after the birth or adoption of a child.
Career Development Programs
Amazon offers various professional development opportunities, including:
Mentorship programs
Leadership training
Online and in-person development classes
Access to both Amazon Learning and LinkedIn Learning platforms
Employee Assistance and Unique Benefits
Amazon provides several distinctive benefits that set it apart from other employers:
Employee Discounts: Employees receive a 10% discount on Amazon.com purchases, saving up to $100 per calendar year. Additionally, Amazon Extras provides access to nearly 3,000 deals, including discounts on car insurance, phone plans, travel, and entertainment.
Welcome Door Program: Amazon welcomes refugees from all over the world and has programs in place to help ease their transition, including citizenship assistance and free legal support, plus reimbursement for Employment Authorization Document renewal fees.
Amazon CARES: Amazon has a specialized team dedicated to supporting employees and their family members who have been diagnosed with cancer, providing personalized assistance to help navigate work, care, benefits, and resources.
Anytime Pay: Amazon's Anytime Pay benefit allows employees to access the money they've earned before their next paycheck, helping with unexpected expenses.
Additional Perks and Programs
Prime Membership and Transportation
All Amazon employees receive a no-cost Prime membership after 90 days of tenure, providing access to free shipping, streaming services, and other Prime benefits. Amazon also offers commuter services and transportation allowances depending on location.
Pet-Friendly Workplace
Amazon is known for being a dog-friendly workplace, allowing employees to bring their dogs to many office locations. This unique perk reflects Amazon's commitment to creating a positive work environment.
Employee Giving Program
Amazon matches employee monetary donations to eligible nonprofit organizations dollar-for-dollar, up to an annual maximum of $15,000 per employee. The company also values volunteerism by matching volunteer hours at a rate of $25 per hour.
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Maximizing Your Amazon Benefits
To get the most value from your Amazon compensation and benefits, there are a few handy tips to keep in mind.
Maximize 401(k) Contributions
Amazon matches 50% of your contributions up to 4% of your salary, which equals free money worth 2% of your annual pay. If you don’t contribute at least 4% of your salary, you’ll likely be leaving thousands of dollars on the table every year. If possible, contribute the full $23,500 in 2025 ($31,000 if you’re 50 or older) to maximize your investment growth.
Use the Mega Backdoor Roth if You're a High Earner
Using the mega backdoor Roth program, high-income Amazon employees can boost their retirement savings significantly. In fact, this strategy can add hundreds of thousands in tax-free retirement savings over your career.
Set Up Automatic Mega Backdoor Roth Conversions
If you're using the mega backdoor Roth strategy, set up automatic monthly conversions rather than waiting until year-end. This minimizes the taxable growth on your after-tax contributions and simplifies your tax situation. Most employees can automate this process through Fidelity NetBenefits.
Time Your RSU Sales Around Trading Windows
If you're subject to trading restrictions, plan your RSU sales during open trading windows rather than waiting until you "need" the money. Amazon's trading windows typically open two to three days after earnings announcements and last about six to eight weeks. Mark these dates on your calendar and prepare your selling strategy in advance.
Increase Your RSU Sell-to-Cover Percentage (If Necessary)
The default 22% withholding on RSU vesting is often insufficient for mid to high-level employees. Many L5+ employees need 35%–45% withholding to avoid large tax bills at year-end. To increase your sell-to-cover percentage, access Fidelity NetBenefits during open trading windows.
Maximize Your HSA Contributions
If you're eligible for an HSA, contribute the maximum amount ($4,300 for individuals, $8,550 for families in 2025). HSAs provide triple tax benefits and can serve as a stealth retirement account. After age 65, you can withdraw funds for any purpose penalty-free, making HSAs more flexible than traditional retirement accounts.
Use FSA Funds Strategically Before Year-End
Healthcare FSAs have use-it-or-lose-it rules with only $640 rolling over to the next year. Plan predictable medical expenses like annual physicals, dental work, or prescription glasses for later in the year to maximize your FSA value. (Many employees forget about vision expenses, which are FSA-eligible.)
Leverage Amazon Pharmacy for Prescription Savings
Amazon employees get additional discounts at Amazon Pharmacy beyond insurance coverage. You save $5 on 30-day prescriptions and $10 on 90-day prescriptions, plus Prime members get free two-day delivery. For families with regular medications, these savings add up significantly over time.
Take Advantage of Amazon Extras for Major Purchases
Access Amazon Extras for significant discounts on major life expenses. Over 30,000 Amazon employees used mortgage discounts in 2022, saving thousands on home purchases. The platform also offers deals on auto insurance, phone plans, and other recurring expenses that compound savings over time. Remember: a penny saved is a penny earned.
Plan Your Departure Timing Around Vesting
If you're considering leaving Amazon, time your departure just after major RSU vests rather than just before. Leaving in December means forfeiting RSUs that would vest in May, potentially costing tens of thousands of dollars. Similarly, staying three years ensures you're fully vested in your 401(k) match.
Work with a Fiduciary Financial Advisor
Amazon's compensation structure is complex, making it all the more important to get professional guidance when planning for retirement. A fiduciary financial advisor can help coordinate your RSU sales, retirement contributions, tax planning, and estate planning strategies. Best of all, fiduciary advisors are legally obligated to prioritize your well-being and disclose any conflicts of interest, so you can rest easy knowing you’re in good hands.
Get Help from TrueWealth Financial Partners!
At TrueWealth Financial Partners, we understand the nuances of Amazon's compensation structure, from RSU vesting schedules to mega backdoor Roth strategies. We can help you integrate all aspects of your Amazon benefits into a cohesive financial strategy that aligns with your long-term goals and life changes.
Ready to optimize your Amazon compensation and benefits strategy? Schedule a free consultation with one of our fiduciary financial advisors, and we can get started on making your golden years truly golden.
Frequently Asked Questions
How does Amazon's compensation compare to other tech companies?
Amazon's total compensation is competitive with other major tech companies, though the structure differs significantly. The backloaded RSU vesting and substantial sign-on bonuses create a unique compensation profile that emphasizes retention and rewards loyalty.
When should I sell my vested Amazon RSUs?
Many Amazon employees sell 75%–100% of vested RSUs to reduce concentration risk and diversify their portfolio. The exact timing depends on your tax situation, financial goals, and overall portfolio allocation.
Can I contribute to both a traditional IRA and the mega backdoor Roth?
Yes, you can contribute to a traditional or Roth IRA in addition to the Amazon 401(k) and mega backdoor Roth.
What happens to my unvested RSUs if I leave Amazon?
Any unvested RSUs are forfeited when you leave Amazon. This makes timing your departure important, especially if you have significant unvested equity scheduled to vest soon.
How much should I contribute to my Amazon 401(k)?
At minimum, contribute 4% to capture the full employer match. If possible, maximize your contributions up to the annual limit ($23,500 for 2025, or $31,000 if you're eligible for catch-up contributions).
Are Amazon's health insurance plans good?
Amazon offers competitive health insurance with multiple plan options. The company provides comprehensive coverage, including medical, dental, and vision insurance, plus valuable HSA options for high-deductible plans.
How does Amazon's parental leave compare to other companies?
Amazon's 20 weeks of paid leave for birthing mothers and 6 weeks for supporting parents is among the most generous in the tech industry, significantly exceeding the benefits offered by many companies.
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