Microsoft to increase salaries, stock compensation to retain employees
Microsoft is competing for talent with firms like Amazon, Google and Meta, but salary budget increases will differ by country
Microsoft plans to "nearly double" its budget for merit-based employee pay hikes and raise the range of its annual stock-based compensation by at least 25% in efforts to stay competitive with rival tech firms in the war for top talent.
The software giant told Bloomberg that the decision will mostly affect "early to mid-career employees."
As of June 2021, the firm employed 103,000 people in the United States and another 78,000 globally.
Microsoft employee wages vary widely, as per several third-party estimates, depending on job function, with software engineers among the highest-paid employees.
According to the Glassdoor, a fresh graduate working as a software engineer at Microsoft earns around $163,000 per year.
"As we approach our annual total rewards process, we are making a significant additional investment this year to compensate our employees globally," the Redmond, Washington-based company said.
CEO Satya Nadella also detailed the plans in an internal email.
"Time and time again, we see that our talent is in high demand, because of the amazing work you do to empower our customers and partners," Nadella said.
"Across the leadership team, your impact is both recognised and deeply appreciated — and for that I want to say a big thank you. That's why we're making long-term investments in each of you. Specifically, we are nearly doubling the global merit budget."
He added that the company is also raising annual stock ranges by at least 25% "for all levels 67 and below."
Level 67 refers to senior managers.
Salary budget increases will differ by country, and the most significant increases will occur "where the market demands".
Microsoft boosted research and development spending by 21% in the first quarter, including payroll and stock-based compensation. The tech giant has also increased its cloud engineering investment as it seeks to keep pace with Amazon Web Services (AWS).
In the last year, Microsoft was able to keep attrition below 10%, according to the company's Chief People Officer Kathleen Hogan.
"That said, I know we have pockets where attrition is higher," Hogan wrote in an internal memo seen by Business Insider.
She highlighted that losing talented individuals may cause stress and incur costs to re-hire candidates.
According to the Hogan's email, Microsoft's "ManageRewards" tool, which enables managers to alter pay and other rewards, will be available shortly, but the new compensation changes would not take effect until September 1, 2022.
Microsoft is currently competing for talent with firms like Amazon, Google and Meta, as well as start-ups, in addition to dealing with cost-of-living increases. The epidemic has also caused many people to migrate and rethink their career possibilities.
Amazon increased the base salary limit for corporate employees to $350,000 from $150,000 in February to deal with a "particularly competitive labour market."
Alphabet, the parent company of Google, is also tweaking its performance system to provide higher salaries to employees.