Shopify delays compensation overhaul, lays off 50, as fallen stock price complicates plans

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Shopify Inc. SHOP-T is putting off a compensation overhaul that would give its employees more choice in how they are paid, as the Ottawa-based company addresses the challenges posed by its fallen stock price and the persistent sell-off pummelling the technology sector.

In early April, Shopify told its employees their compensation packages would be changing this summer, giving them the flexibility to decide how much of their salary is paid in stock and how much in cash. It was part of an internal strategy designed to mitigate dissatisfaction among some employees, who have seen the overall value of their compensation packages decrease this year because Shopify’s stock has fallen more than 70 per cent from its peak in late 2021.

“Shopify is reinventing compensation and leading the way in the most competitive talent market to give employees more agency,” the company said in a statement at the time. When the changes were announced at a town hall, employees were assured they would soon walk away with a higher overall salary across most roles and locations.

“As a work-from-anywhere company with a global and diverse workforce, a one-size-fits-all compensation strategy no longer serves our needs best,” Shopify had said. “Our employees will be given a ‘total rewards wallet’ for their compensation and be able to allocate between cash and equity based on their individual needs and under certain parameters.”

But now, those ambitious changes – which were to take effect this month – have been quietly pushed back to at least September, according to two senior officials at Shopify.

The Globe and Mail is not identifying the sources because they were not authorized to discuss the matter publicly.

The changes have already caused problems at the company. At least 50 people have been laid off since April, partly because their compensation packages were out of line with those of certain colleagues under the new plan, the two sources said in separate interviews. The 50 represent less than 1 per cent of the more than 10,000 employees at the company.

Dozens of job offers have also been delayed while the company adjusts its salary framework, the sources said. That means some new hires have been put in a state of limbo as they await their start date, and a number of prospective employees have yet to receive written offers with salary figures beyond those discussed with Shopify recruiters.

In a statement issued after The Globe’s reporting on Wednesday, Shopify spokesperson Alex Lyons said, “We are introducing an entirely new compensation approach designed to give employees more flexibility and choice. This is a massive undertaking that needs to be designed with consideration and rigor to meet various legal and regulatory requirements. We remain excited to roll out this new program as planned when it’s fully ready in the fall.”

Last year, Shopify stock traded at all-time highs, hitting a record $222.87 (adjusted for a recent 10-for-1 stock split) on the Toronto Stock Exchange in November. That meant many new employees were happy to be compensated in stock units.

Since then, however, the bottom has fallen out. Pandemic trends such as a surge in online shopping have now largely reversed.

On Tuesday, Shopify closed at $44.36.

Still, the layoffs that have occurred or will occur because of the compensation revamp have not affected overall plans for hiring at Shopify, the sources said.

Separately, in an interview, Shopify president Harley Finkelstein said there were no plans to change staffing levels or cut down hiring as of late June.

Economic uncertainty stemming from inflation, rising interest rates and the war in Ukraine has weighed heavily on tech companies in 2022, forcing many to significantly scale back hiring or reduce their staff. The Nasdaq 100 Index, which gets half its value from tech firms, has plunged by almost a third this year, erasing more than US$5-trillion so far. It ended June with a tumble of 9 per cent, adding to the slump of 20 per cent over the second quarter and on track for its biggest year-over-year decline to date.

“We are a company that has always thought about this operational discipline, that when there’s an opportunity, we want to have enough money and bandwidth to go and seize it. We run our company in a way that I think is very unique to a lot of other tech companies,” Mr. Finkelstein said.

“So, when there’s a period of uncertainty, Shopify can get through it easier than others and we can emerge on the other side better, stronger, faster.”

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