Amid talent crunch, Microsoft looks to keep workers through pay hikes, bonuses

Microsoft is scrambling to keep workers in the fold amid tempting wage increases from rivals as tech talent becomes harder to find. Among other things, it's increasing annual stock-based compensation by at least 25% for some mid- and high-level employees.

Microsoft headquarters

Under tremendous pressure to attract and retain talent, Microsoft is boosting worldwide compensation for employees to remain competitive with some of its big-tech rivals, including Amazon and Meta.

The Redmond, Wash. company plans to nearly double its global budget for merit-based salary increases, and increase its range for annual stock-based compensation by at least 25% for employees at the senior director level and below, according to a GeekWire report. The news was first reported by Business Insider

“Specifically, we are nearly doubling the global merit budget,” Microsoft CEO Satya Nadella told employees in an email Monday morning. “Merit budgets will vary by country, based on local market data, and the most meaningful increases will be focused where the market demands and on early to mid-career levels. We are also increasing Annual Stock ranges by at least 25% for all levels 67 and below.”

The reference to “levels 67 and below” refers to employees up to senior directors, according to GeekWire.

For the technology market, the talent shortage is far worse than the overall national unemployment rate, which hovers around 3.6% in the US; for the tech industry it’s just 2%, according to CompTIA, a nonprofit association for the IT industry and workforce. That's prompted employers throughout the US to step up their search for workers — and to revisit the salaries and qualifications (such as a four-year college degree).

“This increased investment in our worldwide compensation reflects the ongoing commitment we have to providing a highly competitive experience for our employees,” a Microsoft spokesperson said in an email reply to Computerworld.

Microsoft’s pay increases follow similar moves by Apple and Alphabet, which have targeted select groups of employees in the software and hardware engineering departments, according to reports.

In December 2021, Apple gave select hardware, software, silicon design, and operations managers stock bonuses ranging from $50,000 to $180,000 in order to stop defections to Facebook’s Meta, according to Bloomberg.

In March, the company handed out a second round of stock-based bonuses to some staffers in amounts of up to $200,000, Bloomberg reported.

Microsoft is reportedly most concerned about employees leaving for Amazon, which doubled its compensation cap from $160,000 to $350,000 earlier this year, Bloomberg reported in February.

Microsoft, however, has been keenly focused on upping its video game prowess, meaning it wants more developers for its gaming efforts, specifically. In January, Microsoft acquired Activision, the maker of "Call of Duty," "World of Warcraft," and "Candy Crush" for a record $68.7 billion. The acquisition positioned Microsoft at the front of the gaming industry and possibly the virtual reality metaverse.

Compensation matters, particularly with younger employees, according to research by Robin Powered, a workplace management software maker. Its survey of 600 Gen Z employees revealed that most who were ready to leave their positions now said the reasons driving their plans included more money (53%), a better fit elsewhere (33%), a promotion (30%), and better workplace culture (24%). Additionally, 74% of those surveyed indicated they were willing to stay in their current jobs for up to a 20% raise.

By 2025, Gen Z — the 72 million people born between 1997 and 2012 — will make up about a third of the workforce, according to Robin. 

"When we asked Gen Z employees how important happiness was to them in their job, a shocking 44% reported that they would stay in a job they weren’t happy, provided the salary was satisfying, yet another 47% would choose happiness over money," Robin Powered's research showed.

About one in five organizations (18%) plan to add at least one extra salary increase this year, according to research firm Gartner. A little more than one-third (36%) of 122 companies that responded to Gartner’s April survey indicated they hadn’t decided yet whether to offer additional increases. And one in three organizations plan on ad-hoc salary reviews this year, compared to the standard annual review, Gartner’s survey showed.

Copyright © 2022 IDG Communications, Inc.

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