Microsoft will not raise salaries for full-time employees this year, a company decision that may have a ripple effect across the tech industry, which is already feeling the heat amid rising inflation. One senior software engineer at Microsoft, Isabela Moreira, described the company’s decision as a “slap in the face” in a Twitter post. “Even with merit increases, I still feel like I’m not keeping up with inflation,” she wrote. “This is a huge disappointment.”
It’s been a tough couple of months for tech companies, which have been forced to tighten their belts as clients slow spending and the coronavirus pandemic takes its toll on sales. Some have even gone as far as to lay off workers. In January, Microsoft CEO Satya Nadella announced that the company would cut 10,000 jobs or around 5% of its workforce. Others like Alphabet and Amazon have cut back on staff bonuses and stock awards.
But Microsoft’s decision to forgo salary hikes for its full-time employees may have a considerable impact, as it comes on top of the January layoff announcement. In a memo to managers, the company said it will be “tightening its purse strings in light of current economic conditions.”
In an email to staff, Microsoft’s chief people officer Kathleen Hogan also noted that the company is “being more deliberate” regarding hiring and will reduce bonus amounts and other compensation this year. She added that fewer employees would be able to receive exceptional rewards but that it still plans to maintain its promotion budget and reward high performers.
Amid the gloomy economic conditions, many employees will be upset by the company’s decision not to give them raises this year. But it’s worth noting that the company is still in good financial standing, with revenue up and a healthy profit. Its bottom line was up 7% last quarter, with $26.5 billion in cash and equivalents.
Tech companies aren’t alone in slowing down their hiring, which is exacerbated by a cooling global economy. It combines factors, including a slowdown in China and the US, sluggish global demand for smartphones, tablets, IoT devices, and other consumer technology, and increasing energy and shipping costs.
Unsurprisingly, tech firms are hedging their bets, especially public ones that worry about impressing investors. “Since these companies are publicly traded, they’re subject to a lot of pressure from shareholders,” says Jack Gold, founder, and principal analyst at J. Gold Associates. “They have to balance their checkbooks.” This is not the first time Microsoft has slowed pay-hikes. The company had a similar freeze in 2015 but lifted the cap the following year. The company has yet to do that this time, but it increased the amount of money it gives its highest performers. That’s something that could be repeated if the economy stays soft. As for the future, “it’s too soon to tell what the next few years will look like,” Gold says.
