Tesla tells employees merit awards are on hold after Covid-19 - CNBC

Tesla employees learned on Thursday that the company has scheduled a new round of performance reviews to be completed by July 27, and plans to delay paying out merit awards previously promised to employees until after that cycle.

The composition of merit awards at Tesla has varied over time, but can include raises, stock options, title changes, and incentive payments for meeting certain goals like producing a high number of vehicles in a single quarter.

In the June 17 e-mail, which Tesla employees shared with CNBC, the head of HR at the company, Valerie Capers Workman, cited unspecified Covid-19 impacts as a justification for holding off on awards and promotions:

"Due to the economic impacts of COVID-19 on the business, and virtually every business in the world, any merit notifications you may have received in prior months will not be awarded since we are replacing the prior merit cycle with the one starting in July. Along with broader efforts to manage costs, the decision to hold these awards was important to help ensure that Tesla would thrive in the aftermath of this pandemic."

She added that the plan has the support of CEO Elon Musk and the rest of the leadership team.

In a separate e-mail, Tesla's acting HR director, Vince Woodard, told "set rate" production employees that if they were granted awards between January and June 2020, those awards will be paid out after the July review.

Covid-19 impacted Tesla's operations and consumer confidence significantly in the first and second quarters of 2020. For example, Tesla begrudgingly suspended vehicle manufacturing in Fremont, California, between late March and early May. Earlier, it had to suspend operations at its new vehicle assembly plant in Shanghai. In April, Tesla saw a sales slump in China, and in April and May it reportedly saw vehicle registrations in California decline steeply versus the prior year.

Performance reviews generally create tension among Tesla employees. The company has sometimes made steep cuts to headcount during or shortly after review periods.

In the second half of 2019, before the emergence of Covid-19, Tesla slashed commissions and added responsibilities for sales employees, and had already delayed end-of-year performance reviews and awards for all, as CNBC previously reported.

Tesla did not immediately return a request for comment.

Here's the email announcing the new performance review process:

To: Everybody

From: Valerie Workman

Subj. Introducing Performance Acceleration 2020!

Date: June 17, 2020 [Ed. Time stamp redacted]

Hey Everyone!

I'm excited to share that from July 1 through July 27 we will be conducting our new performance review session, "Performance Acceleration 2020." We continue to set excellence as the passing grade and aim to build a winning all-star team. It has been an inspiration to watch so many of you during this unusual and challenging time.

Performance Acceleration 2020 is how we as an organization will evaluate performance, offer feedback, set clear goals and expectations, celebrate strengths and provide support/coaching where needed. It is also the primary way we will determine promotions, merit increases, equity awards and other recognition as well as assess our organization and what is needed to continue to succeed.

Performance Acceleration 2020 is for all employees company-wide and will be a bi-annual process (occurring every July and January) moving forward (in some cases quarterly reviews will continued based on business practices.) Conducting reviews on a regular cadence allows for regular and predictable performance feedback, increased opportunities for career growth and development, more time to assess achievements and overall more fairness in evaluations.

Due to the economic impacts of COVID-19 on the business, and virtually every business in the world, any merit notifications you may have received in prior months will not be awarded since we are replacing the prior merit cycle with the one starting in July. Along with broader efforts to manage costs, the decision to hold these awards was important to help ensure that Tesla would thrive in the aftermath of this pandemic. However, please know that data related to previous Performance Reviews, awards, equity, promotions and level ups will be available for informational purposes to all managers to review and take into account as part of this review session.

Please know that this program has the support of Elon, myself and the entire leadership team. You'll be hearing more about this from your leaders and HR Partners next week and will have a chance to ask questions and get familiarized with the new way to review how scrappy gets done!

Thank you for all you do to ensure the success of our company!

Valerie

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