Google is shaking up its compensation to incentivize higher performance

Google CEO Sundar Pichai speaks at a Google I/O event in Mountain View, California. 

Google is making changes to its compensation structure in a bid to incentivize higher performance from staff.

The company announced on Tuesday that it will change how employee performance ratings work. The change gives more staff the opportunity to achieve one of the highest scores in their annual review and, therefore, higher compensation, while lower performers receive smaller bonuses and equity.

In an email to staff with the subject line “Strengthening our performance culture,” John Casey, Google’s vice president of global compensation and benefits, said that managers will be able to allocate the “Outstanding Impact” score to more employees than previously.

“This means more Googlers will have the opportunity to achieve that rating during annual reviews, and their bonus and equity award will be modeled using the O’s individual multiplier in 2026,” he wrote in the email, which was seen by B-17.

Googlers’ performances are rated once a year using an internal system known as Googler Reviews and Development (GRAD). An employee’s impact is scored on a scale, with “not enough impact” being the lowest and “Transformative Impact” being the highest. The ranking a Googler is given usually determines their bonus and equity.

Most Googlers fall into the second-highest bracket of “Significant Impact.” The “Outstanding Impact” bucket captures a smaller number of higher performers, while the “Transformative” bucket is reserved for a very small number of excelling Googlers.

Casey said Google will also increase the discretionary budget it gives to managers so they can dish out more rewards to high performers who fall within that “Significant Impact” bracket.

He added that the changes would be “budget-neutral,” meaning employees with lower ratings could receive smaller bonuses and equity in their compensation packages as more of the budget is allocated to the higher brackets.

“We want to be upfront that to fund this we’ll be slightly reducing the bonus and equity individual multipliers for Significant Impact and Moderate Impact ratings,” Casey told staff. “It’s important to note that Significant Impact will remain a strong rating — achieving it will still get you more than your target bonus.”

Google spokesperson Courtenay Mencini told B-17 in a statement, “We’re making these changes to further reward top performers and continue our momentum across the company.”

The changes at Google come amid a broader shift across Big Tech to run their businesses more efficiently and push employees to perform better. Microsoft recently rolled out new policies aimed at dialing up performance pressure on employees, while in January, Meta announced it would cut 5% of its workforce, focusing on low performers.

While Google hasn’t gone to such lengths itself, the changes to its performance ratings are designed to push staff to work harder and aim higher.

“High performance is more important than ever to achieve the goals we’ve set,” wrote Casey in the email to staff, adding that the changes were being made to “further reward top contributors” at the company.

Read the full email sent to Google employees: