The end of the era of super high salaries in the Internet industry

Author | Huang Yu

Editor | Zhou Zhiyu

After experiencing a rapid surge and entering a period of stable development, the wealth creation myth of Internet giants is no longer the same, and the era of promotion and salary increase by riding a helicopter and eating from a big pot is completely over.

Recently, Tencent's Organization and Talent Development Department sent out a company-wide email announcing the update of the "Tencent Employee Career Development Management System," including hidden professional ranks, setting a minimum stay time of 1 year for all ranks, encouraging lateral development, and strictly implementing the sunshine criteria for rank review.

This adjustment is a continuation of Tencent's rank reform in 2022. Tencent stated in the email: "Since 2022, with changes in the external environment and the company's development entering a new stage, we have been continuously adjusting in terms of ranks to meet the new requirements for human resource management."

Behind the rank reform is Tencent's further efforts to reduce costs and increase efficiency, as well as its desire to activate organizational vitality and have the best-performing individuals take the stage. Ranks are often linked to salaries, and after this adjustment, it will become increasingly difficult for fresh graduates to quickly earn a million-yuan salary at Tencent.

Furthermore, at Tencent, a high rank no longer guarantees a high salary. Employees are now evaluated based on performance contributions, capability improvements, salary competitiveness, and other factors. This has been the trend in Tencent's salary assessment over the past two years. Against this backdrop, the era of ultra-high salaries created by the Internet industry may be coming to an end.

As an absolute leader in the Internet industry, Tencent's total market value has returned to HKD 4 trillion in the recent stock market rally. However, Tencent has already passed the period of rapid revenue growth, and regaining its peak market value is not an easy task.

Facing changes in the internal and external environment, to maintain its "iron throne," Tencent and Pony Ma have always had a sense of crisis in recent years, fearing that the organization will become mediocre and hoping to regain the entrepreneurial spirit to avoid falling into the "big company syndrome."

As the pace of the times slows down, rank reform has become the common choice for almost all Internet giants, and Tencent is no exception.

Reform

In the past two years, Tencent has adjusted employee rank promotion rules, salary, and performance evaluation rules multiple times.

In the 2022 rank reform, Tencent simplified the performance evaluation for all employees from the previous five-star system to three categories: Outstanding, Good, and Underperform, and streamlined the review process for employees at level 9 and above to once a year.

In this adjustment, Tencent extended the minimum stay time requirement for employees with a target rank of level 8 and below from 0.5 years to 1 year, aligning it with level 9 and above. According to Wall Street News, employees at levels 5 to 8 in Tencent are mainly fresh graduates.

It is worth mentioning that in early August, Tencent's 2025 campus recruitment officially started, not only with a significantly larger scale compared to the previous two years, but also expanding the graduation time range for applicants from one year to two years. This means that in addition to the 2025 graduates, the 2024 graduates and some 2026 prospective graduates may also participate in this recruitment drive An HR from a major Internet company pointed out that after rapid expansion in the past, large companies like Tencent are already facing the problem of an inflated number of management levels. Now, raising the recruitment and promotion threshold at Tencent helps prevent further expansion of management levels, while also reducing costs and increasing efficiency.

Although it has become more difficult to be recruited and promoted through campus recruitment, an insider at Tencent revealed to Wall Street News that for young employees who perform exceptionally well, the company has relaxed the eligibility criteria for the green channel. That is, if the performance is outstanding, they can apply for promotion, helping outstanding young people achieve cross-level or off-cycle promotions. After the adjustment of job levels, the corresponding salary ranges will also be adjusted accordingly.

After this adjustment, professional job level information of Tencent employees will no longer be publicly displayed on WeChat Work. Tencent does not want everyone to be defined and rigidified by job levels, nor does it want heroes to be judged by job levels, or be bound by bureaucratic practices of job level equivalence.

In addition, Tencent has also started to encourage lateral development. It is reported that after this adjustment, Tencent has simplified the cross-channel and cross-professional job level transitions, making it easier for everyone to have more open choices in their career development paths and find more suitable and passionate development directions within Tencent.

The aforementioned Internet company HR stated that the basic 3 to 4 years after entering a large company is a peak period for job hopping. Either they are dissatisfied with the treatment, or they are dissatisfied with the current responsibilities and want to change positions, which is not easy. Now that Tencent is encouraging lateral development, which means internal job hopping, it can to some extent reduce talent loss.

A Tencent veteran told Wall Street News that these adjustments have no impact on him personally at all, because he is neither a recent graduate nor considering changing positions. However, he believes that from the company's perspective, this organizational change is a good thing, conducive to activating organizational vitality and maximizing individual capabilities.

In any case, Tencent's job level reform this time is a microcosm of the entire Internet industry. Many young people with dreams of entering large companies must accept the reality that the era of rapid advancement is gone.

Deceleration

In the golden age of Internet development, working for a large company meant the ultimate ideal for job seekers, with generous benefits and growth opportunities far exceeding those in other industries, which used to be the key factor attracting talent to Internet giants.

However, as the dividends of the Internet industry fade away, the growth of large companies slows down, and the organizational structure appears complex and bloated. The previous job levels and salary systems no longer meet the current development needs.

In recent years, cost reduction and efficiency enhancement have become the main theme, and a drastic job level reform has also emerged among Internet giants. In addition to Tencent, in the past year, companies such as Alibaba, ByteDance, Xiaohongshu, and Kuaishou have all carried out job level reforms, hoping to enhance the organization's combat effectiveness through new rules of the game.

In 2022, affected by the overall economic environment, Internet regulations, and sluggish business growth, Tencent's revenue declined for the first time, decreasing by 1% year-on-year to 554.6 billion RMB. Sensing the crisis, Tencent initiated the latest round of major reforms in 2022, focusing on cost reduction and efficiency enhancement, as well as shrinking non-core businesses.

At the end of 2022, during an internal employee meeting held online by Tencent, Pony Ma emphasized "cost reduction and efficiency enhancement" as a key focus of the meeting, while sharply pointing out that "there is not much time left for certain businesses." Many businesses that are not profitable should be cut off, without hesitation, for example, having too many non-core businesses is not cost-effective compared to the management costs and efforts invested by the company Pony Ma is very determined in the internal organization and business transformation.

Last November, on the occasion of Tencent's 25th anniversary, Pony Ma mentioned internally that the best people should be on stage. At the same time, he cautioned that there were criticisms from old employees on the intranet, saying that when they first joined the company, they often received feedback from department managers on products, which has been less in recent years.

"The best state can be understood in many ways. From my observation, our best state is when we are investing and focusing on products." Pony Ma said that Tencent does not need people who do not care about their own products. If they don't even use their own products and just sit in the office every day, there won't be new solutions or ideas.

After the adjustments, Tencent's reforms have started to show results.

At the beginning of this year's annual meeting, Pony Ma said, "Now we are as excited as if we were injected with chicken blood, returning to the process of how we gradually rose from being ranked outside the top ten in the gaming industry back then. Remembering the difficulties of entrepreneurship will give us fighting spirit, we cannot rest on our laurels, we must keep moving forward."

In terms of performance, Tencent has also passed through a low point. The financial report shows that in the second quarter, Tencent achieved a revenue of 161.12 billion yuan, an 8% year-on-year increase, higher than the growth rate of the previous two quarters; Non-IFRS net profit attributable to equity holders increased by 53% year-on-year to 57.31 billion yuan, exceeding market expectations.

A recent research report by CICC maintained Tencent Holdings' "outperform" rating, considering transactions, corporate services, and overseas games as future growth drivers, expecting its annual compound growth rate to remain at around 20%, with a target price of HKD 480.

However, facing the current still not optimistic market environment, as well as the industry's major changes brought by AI, Tencent must always maintain a sense of crisis, make the organization full of combat effectiveness, in order to maintain its industry position