Shopify to launch ‘Flex Comp’ software, giving employees choice in mix of cash and equity paid

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Shopify Inc. is launching a compensation scheme to give employees more choice in the mix of cash and equity they are paid, as the Ottawa-based e-commerce company continues to address challenges posed by its fallen stock.

The launch includes new proprietary software for its employees, called “Flex Comp,” built by developers and other staffers at Shopify. The new system means Shopify won’t rely on external payroll and stock-vesting tools as do many big companies.

Shopify said clarity around pay is an industrywide problem, and that there have been many instances globally of disparities in work force salaries stemming from compensation systems that do not work for a diverse set of employees in different jobs on different levels or geographies. This leads to “the few making choices for the many,” the company said in a statement.

Employees will receive a single total compensation number and have the choice to determine how they allocate their pay between cash and stock. They can then go back and change that allocation as their personal preferences change.

“Under the old industry structure, it was unclear and time-consuming to understand exactly how much you earned,” Shopify said. “You would find base salary on your pay stub and equity in another [document], made even more complicated by vesting schedules, stock-market unpredictability, and unreliable bonuses tied to company performance.”

The creation of the new tool involved people from nearly all Shopify departments, the company said, including “a two-week coding sprint” that saw everyone from chief executive Tobias Lutke to dozens of developers in a war room, programming late into the night.

The software shows two windows next to each other: One, a small screen like a receipt that shows a summary of a given employee’s base salary and other options adding up to an annual total; and the other, a larger screen that shows subheadings of “annual allocation” and “equity preference.”

Employees can set the percentage of base salary versus equity by toggling on a digital scale. And Shopify plans to add extra elements such as charitable donations and Shop Cash, a digital reward currently only available to some of the company’s Shop app customers.

Shopify first informed its employees that their pay packages would be changing at a town hall in early April, The Globe and Mail reported.

At the time, they were told those changes would begin over the summer, and that many of them would walk away with an overall higher salary across most roles and locations. But by early July, Shopify had quietly delayed that overhaul to the fall. It later confirmed that delay in a statement issued after The Globe’s reporting.

Then, in late July, the company announced a 10-per-cent reduction of its entire work force, or roughly 1,000 people globally. It also cancelled fall internships and paused further recruiting. In early September, Shopify further extended this wave of layoffs with a small number of cuts while boosting pay for many of its remaining employees amid the companywide restructuring.

Many tech companies have been at the mercy of a broad market downturn because of macroeconomic trends – such as inflation, rising interest rates and the war in Ukraine. Across the board, companies have seen reduced valuations, diminished financing rounds and cratered stock prices.

Shopify stock has plunged by more than 70 per cent this year since its peak in late 2021. The company has long provided restricted stock units (in addition to base salaries) at an allocation set by management. So, when the stock price fell so sharply, it led to some internal dissatisfaction among a number of employees, given that it affected the total value of their compensation. That is why the company pursued its ambitious overhaul.

It remains unclear if Shopify will scale up this new tool and offer it to its customers as a licensed service. For now, it would only say that there is “room to build in the future.”

“We’re excited to launch Flex Comp for Shopify employees and hope it inspires others,” said Tia Silas, Shopify’s chief human resources officer, in a statement.

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