Low Salaries Can Also Retain Talent

Author | Wang Lei

Editor | Qin Zhangyong

What does Musk rely on to retain 120,000 employees?

On charisma alone? Obviously not, as everyone needs to support their families.

The overseas media Business Insider somehow gained access to Tesla's internal compensation database, providing detailed data on nearly 100,000 employees as of December 2021, including specific salaries and the hiring process.

This has exposed many fascinating insights into Tesla's internal compensation structure.

In short, Musk conducts at least 9 rounds of interviews when hiring employees, aiming to screen out "loyal" Tesla fans. Even each Tesla recruitment requires Musk's personal signature for approval.

Moreover, Tesla relies on a low base salary and high-expectation salary structure to retain employees. Base salaries are very low, but employees can earn stock option bonuses through exceptional performance.

When it comes to playing tricks, Musk is the master.

01 Bottom-Ranking Base Salaries in the Industry

How much does Musk pay his employees?

Based on this internal database, Business Insider analyzed the median base salaries of approximately 13,000 full-time salaried employees in the US, covering various departments such as engineering, manufacturing, or data management, excluding hourly workers whose salaries are difficult to calculate due to hourly wages.

It also provided an intuitive salary analysis chart based on business departments:

From the table, it's evident that the median base salaries of most Tesla employees fall between $100,000 and $150,000, with most earning below $150,000.

Interestingly, the highest salaries are not for engineers involved in car development, who rank second. Instead, employees responsible for legal and government affairs top the list, with a median base salary of up to $200,000 or even higher, significantly higher than other departments.

Moreover, the salary range of $230,000 to $240,000 has the largest number of employees in legal and government affairs.

The customer service department ranks last, with a median base salary of less than $100,000, approximately $80,000, and the most common salary range is even lower, at $70,000.

Additionally, Business Insider further analyzed Tesla's management personnel, focusing on those based in the US, full-time with at least 5 subordinates, and categorized their median base salaries by position.

Data shows that these individuals, including engineering directors and managers responsible for vehicle repairs at Tesla service centers, have median base salaries ranging from approximately $35,000 to $324,000.

According to nine current and former employees, Tesla's compensation structure has remained largely unchanged since December 2021, suggesting it may continue in this manner.

From within Tesla alone, it might not be intuitive to perceive its "low base salaries."

Therefore, Business Insider compared Tesla's median base salaries with those of traditional automakers and the six largest tech companies by market capitalization, using data from the US Securities and Exchange Commission (SEC), including Amazon, Tesla, Ford, General Motors, Apple, Microsoft, NVIDIA, Google, and Meta.

According to 2021 SEC filings, Tesla's median employee compensation was approximately $40,000, rising slightly to $46,000 by 2023.

Compared to other tech giants, Apple's median is $94,000, Microsoft's is $194,000, NVIDIA's is $267,000, Google's is $316,000, and Meta's is as high as $379,000.

It's clear that Tesla lags behind all companies except Amazon ($36,000), confirming interviewed employees' statements that Tesla's base salaries are generally lower than competitors'.

02 Loyalty + Stock Options

According to Business Insider's data, Tesla has over 120,000 employees, even after a previous 10% layoff.

So, why are so many employees willing to stay at Tesla and accept low base salaries?

It's due to loyalty and stock incentives.

On the one hand, Tesla has a rigorous hiring process to screen out die-hard Tesla fans. A current employee familiar with the process stated, "The entire system is designed to find passionate Tesla fans. Although they could earn higher salaries elsewhere, we want those who are fully committed to Tesla."

A former Tesla recruiter who left in 2024 said the interview process for engineers is very stringent, typically requiring at least 9 rounds over several months to assess candidates.

This rigorous process aims to weed out employees who are "in and out," focusing on "your willingness to learn and dedication of extra time, regardless of intelligence or knowledge."

This strict hiring process ensures Tesla's employee turnover remains low.

Additionally, Tesla's "low base salary + high stock reward" mechanism in its compensation system encourages many employees to stay.

A former Tesla sales manager likened stocks to "golden handcuffs," stating that stock rewards initially attracted him to Tesla. "Stocks are the main bait. You might be unhappy with your position, but you tell yourself to be low-key and endure a few more months until my stocks vest."

Nine interviewed current and former engineers and salespeople also said Tesla's stock granting program makes it easier to accept lower base salaries, as Tesla stocks can make them wealthy, even on paper.

Indeed, some Tesla employees have received stocks worth millions of dollars. Tesla's compensation database shows that 44 US employees received stocks worth over $1 million in 2020 and 2021.

To gain deeper insights, Business Insider broke down stock rewards by job category, revealing that most engineering employees received stock rewards exceeding $25,000.

Furthermore, Business Insider studied the median stock rewards and the percentage of employees receiving rewards in each job category, finding that most employees in almost every category received some type of stock reward.

The value of these stocks depends on Tesla's stock price at the time of grant and fluctuates with Tesla's stock price. Over the past five years, Tesla's stock price has soared by 1000%, making stock rewards highly attractive.

Earlier joiners obviously reap greater rewards. One long-time Tesla employee expressed gratitude, "I feel lucky to have joined Tesla early (and received stock rewards). But I see many young engineers expecting the same. I'm not sure if they'll get it."

Musk previously described the impact of stock options on employees, "We give stock options to everyone, making many production line workers (who don't even know what stocks are) millionaires."

However, it's worth noting that about 75% of Tesla's stock rewards are Restricted Stock Units (RSUs), which do not immediately convert to actual stocks upon grant but are provided to employees as company stocks after a vesting period.

This means employees must meet certain conditions to receive the actual rewards.

For Tesla executives, stock rewards are even more exciting. Most receive direct incentive stock options, unlike RSUs, which are tangible stocks.

The compensation database shows that among Tesla executives, except for one without a listed stock amount, the stock rewards for other executives range from $950,000 to $20 million.

For example, Drew Baglino, former Senior Vice President of Powertrain and Energy Engineering, and Zachary Kirkhorn, former Chief Financial Officer, each received stock rewards of $20 million.

"That's part of the benefit of taking a risk and joining Tesla. You might have to endure the pain of a startup: long hours, some uncertainty, but ultimately, the potential for significant rewards," said an engineer who joined Tesla in 2015.

However, the latest situation is that Musk has started cutting performance-based stock rewards for employees since last year.