Elon Musk also shared: "We give stock options to employees and have turned many people working on the production line into millionaires."
Tesla's Pay Strategy: A Gamble to Attract Employees
Tesla attracts millions of applicants each year, but only a lucky few make it. Tesla's hiring process is rigorous, requiring CEO Elon Musk's approval for each hire.
According to internal Tesla salary data obtained by Business Insider (BI), the company had nearly 100,000 employees as of December 2021. This data, combined with public records and interviews with current and former employees, shows that Tesla has a strategy of paying lower base salaries than other tech and auto companies but making up for it with significant stock awards.
Using internal salary data, BI analyzed the median base salary of Tesla’s roughly 13,000 full-time employees in the U.S., broken down by industry group. The data does not include hourly workers in manufacturing.
Base salaries for these positions range from $35,000 to $324,000, including engineering directors and managers at Tesla service centers. This salary structure has remained stable since December 2021, according to nine current and former employees, reflecting Musk’s efforts to find the “most consistent” employees.
“Everything is designed to attract people who are truly passionate,” said one Tesla employee. “They could get paid more elsewhere, but Tesla is looking for loyalty.”
A former recruiter who worked until 2024 revealed that Tesla's engineering interview process often lasted months and included at least nine interviews. This, along with a low salary structure, was intended to weed out people who just wanted to "finish their shift and go home."
“The company cares more about culture than intelligence or experience. Tesla needs people who are willing to learn and work overtime,” the former employee said.
How do competitors pay?
Tesla's December 2023 report said the company employed more than 140,000 employees globally, but by June 2024 that number will drop to about 120,000 due to plans to cut more than 10% of its workforce.
Using data from the Securities and Exchange Commission (SEC), BI compared Tesla's median base salary to traditional automakers and six leading tech companies, and found that Tesla ranked behind all but Amazon.
While there are many factors that influence average salaries, four Tesla employees confirmed that base salaries are typically lower than those of competitors. However, stock grants are a big plus, helping employees accept lower salaries.
“Everyone who accepted this structure was betting on Tesla’s success,” said one former employee. On November 8, Tesla shares rose more than 8% after Donald Trump was re-elected, pushing the company’s market capitalization to $1 trillion.
Stock grant strategy and beneficiaries
Some Tesla employees could receive stock worth millions of dollars. According to data, 44 employees in the US were awarded stock worth more than $1 million in 2020-2021.
Business Insider (BI) analyzed the data and found that the majority of engineers at Tesla receive stock grants of more than $25,000. This value depends on the stock price at the time of grant and can fluctuate with the market.
About 75% of Tesla's grants are restricted stock units (RSUs), 21% are non-qualified stock options (NSOs) for performance bonus agreements, and just 4% are incentive stock options (ISOs) for executives and senior employees.
RSUs are often used in standard compensation packages, while ISOs or NSOs are additional incentives. RSUs grant actual stock ownership over time, while ISOs allow for stock purchases at a fixed price, requiring employees to pay up front but offering potential gains if the stock appreciates.
The data shows Tesla executives received stock grants ranging from $950,000 to $20 million, all of which were ISOs except one.
Tesla’s stock growth over the past five years—more than 1,000%—has made these perks particularly attractive. While base salaries are lower than those of big tech companies like Meta, Google, or Amazon, Tesla still attracts talent because of the potential stock value.
“Tesla can pay less because employees feel they are contributing to a larger mission: reducing global carbon emissions,” said Greg Selker, chief executive of Stanton Chase.
Elon Musk also shared: "We give stock options to employees and have turned many people working on the production line into millionaires."
"Golden handcuffs" and the pressure to retain talent
Despite its allure, Tesla stock has sometimes been likened to “golden handcuffs.” One former sales executive said the stock grants initially enticed him, but then kept him from staying despite his unhappiness, just waiting for the vesting date.
Tesla is also facing pressure to retain employees amid volatile stock prices. Tesla shares fell 44% from the beginning of the year through mid-April, raising concerns about the sustainability of its hiring strategy.
"If Tesla's stock becomes unstable or falls sharply, the company will have to change its approach," Selker said.
“Working at Tesla is like a gamble,” said an engineer who joined Tesla in 2015. “You have to deal with the pressure of long hours and a tough startup environment, but there is also the opportunity for great rewards.”
With a recruitment strategy that focuses on people willing to take risks and make long-term commitments, Tesla is creating a work environment that is both stressful and attractive for those willing to bet on the company's future.
