Employee compensation impacted by economic conditions
Microsoft’s full-time employees will not be receiving salary increases this year, as the company prepares for the impact of current economic conditions, according to reports. The decision was communicated to the staff through an email from Microsoft CEO Satya Nadella, as confirmed by BQ Prime, who obtained a copy of the email.
Nadella acknowledged that the choice not to increase salaries for full-time employees was not made lightly by the senior leadership team. However, he emphasized its necessity in ensuring the long-term success of the company. Certain hourly or equivalent roles will still receive salary increases, as stated by Nadella.
While the freeze on salary increases is in effect, Microsoft will maintain its budget for bonuses and stock awards this year. In 2022, the company significantly raised its global merit budget and annual stock ranges by at least 25% for employees at level 67 and below, as previously reported by CNBC. This year, Nadella mentioned that the bonus and stock award budget will be maintained, but not overfunded as it was in the previous year, aligning it more closely with historical averages.
Nadella made it clear that outstanding performance will still be recognized with generous rewards, but managers will need to carefully allocate their budgets to differentiate pay based on performance. This approach applies not only to the senior leadership team but also to Nadella himself. Consequently, salary increases will be absent, and annual performance-based bonuses for the senior leadership team will be considerably lower compared to the previous year.
Microsoft’s decision to freeze salary increases coincides with its increased focus on artificial intelligence (AI) as a major investor in OpenAI, as well as the global economic uncertainty. Earlier this year, the tech giant announced plans to lay off 10,000 employees as part of its strategy to align its cost structure with revenue and customer demand. LinkedIn, one of Microsoft’s subsidiaries, also recently disclosed its intention to reduce its workforce by over 700 positions.
These measures align with the actions taken by numerous employers worldwide, who are implementing layoffs in anticipation of economic turbulence.