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Wednesday, August 3, 2016

Useful diagrams for explaining Intel Corp selection of employees for termination in 2015 and 2016

Note: this article was updated and revised with new information and diagrams on 8/16/2016

Circumventing a program that was originally designed to retain younger and more mobile employees (for reasons of employment market competitiveness) and channeling this program to get rid of experienced and older employees who are compensated at a higher pay grades, seems to be behind the high correlation between an employee age and the probability of such employee to be selected for termination during the 2015 and 2016 layoffs.

Here are useful diagrams for explaining Intel Corp selection of employees for termination, based upon Stock Share Level (SSL) grants, as applied to the 2015 and 2016 layoffs.

The diagram below depicts the Intel Corp "Total Compensation" model that was in effect over many years, including 2016.

(Click on image to enlarge view)

The "Total Compensation" model, which was also available as an application on the Intel Corp. employee web site shows that RSU grants was considered an integral part of an employee compensation. The RSU grant has cash value consequences that materialize whenever the RSUs become vested into the future, enticing employees to remain with the company in order to receive the vested amount of stock. It is clear that the SSL policy was established as a retention tool, pitting future stock grant (RSU) value against the lure of potentially higher salary offers, coming from competing companies. This policy, alongside the underground "no poaching" agreement that Intel Corp. and other Bay Area employers colluded in, kept most Intel Corp. employees on the "inside", for many years.

Intel Corp. also practiced a "Glass Ceiling" policy which was meant to prevent "runaway" employee salary increases, for employees whose "Total Compensation" level was considered, close or above "market value". Of course the guidelines for market value were totally under control of Intel Corp. HR Compensation department. Therefor, the pay modeling that employees were presented, was the picture that Intel Corp. wanted them to see, regardless of factual basis.

(Click on image to enlarge view)

Following the Corporate HR compensation guidelines, as well as budget dictation that came from Corporate/Business Unit financial planners, managers had to exercise the means that were available at their disposal to cap the compensation of employees whose total compensation figures were close to, at, or above HR guidelines.

One of the most common ways that Intel managers used achieve this effect was to grant an employee a lower amount of RSUs (classified at SSL4 or SSL5), in order to cap the "overall compensation" figures of such employees and to avoid being reprimanded for exceeding budgets or breaching compensation policy limits.

Note that the numbers specified for the SSL grant distribution percentages comes from Intel Corp. HR policy that was in effect in 2015 and 2016. The source for this data is Intel Corp. own documents.

Click on the diagrams below to enlarge the detail level.

(Click on image to enlarge view)

 

Note from the right side of the above diagram that Intel Corp. SSL grant rules, excluded employees in grades 2-6 from receiving SSL-4, as well as SSL-2 and SSL-1 grant ratings and only 5% of employees in grades 2-6 were mandated to receive SSL-5 grant rating.

(Click on image to enlarge view)

Once Intel Corp. chose to utilize SSL grant level rating as the selection factor for terminating employees during the 2015 and 2016 layoffs, the company violated the legally mandated principle of applying a neutral factor to the selection process, while at the same time claiming that the company Reduction In Force (RIF) action is based on employee performance level.
 
As the above diagram demonstrates, junior employees (grades 2-6) had only 5% chance to be selected for layoff, based upon being assigned SSL-5 for their annual RSU grant. At the same time Senior employees (grades 7+) had a 15% chance of being selected for termination, due to the possibility of being assigned both SSL-4 (10% chance) and SSL-5 (5% chance). Such non-uniform application of employment rules is legally classified as "Disparate Treatment", in other words, employee discrimination.

While Intel Corp. euphemistically referred to the July 2015 as performance-based mandatory buyout (PMB), and used the SSL grant levels as the selection for termination criteria, the Intel Corp. Employee Handbook (2015 edition), section 17.2.2, specifically states the following contradictory information:

 
It is worthy to note the following key sentences, highlighted in yellow in the above photograph:
  • the number of RSUs to be granted, based in part on an employee's expected future contributions
  • RSUs are not granted to you for your past service
Clearly, as evident from the Employee Handbook language, RSU grant assignments to employees (via SSL grant levels 1-5) were not meant to reflect employee past performance and never were considered a performance indicator, particularly since they were based on future expectations and not past performance.

For clearly manipulative reasons Intel Corp. executive management decided to utilize the SSL grant levels given to employees as an employment termination criteria. By applying SSL4 and SSL5 as the selection criteria for termination, only 5% of employees in grades 2-6 were affected, while 15% of employees in grades 7+ were affected. Since employees in grades 7+ are typically more experienced (and hence older), an employee's age was in fact a significant factor, affecting the demographic profile in Intel Corp. employee layoffs of 2015 and 2016 in a significant way. The charts (see below) published by the OregonianLive web site, demonstrate this fact very clearly.
 
Note: The OregonianLive statistical analysis and resulting charts were performed completely independently of our analysis. The data used for the analysis was based upon the OWBPA, U.S. Gov. mandated reports, originally filed by Intel Corp.

2015 Layoffs Employee Age Correlation- OregonianLive Chart


(Click on image to enlarge view)

2016 Layoffs Employee Age Correlation - OregonianLive Chart


(Click on image to enlarge view)

The chart below shows how Intel Corp. managers fared during the 2015 layoffs, relative to the general employee population hat was affected by the layoffs. It seems that being a manager at Intel Corp. buys a person a "second life"... :)
(Click on image to enlarge view)


Your comments are welcome.

--Dr. Flywheel


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