April 22, 2011 7:12 am

Microsoft raises pay for all staff

Microsoft’s 90,000 employees are to receive a company-wide pay increase, in the latest escalation of the war for talent among technology companies.

The pay increases, announced on Thursday in an internal e-mail by Steve Ballmer, chief executive, are aimed particularly at software engineers at the early stage of their careers and mid-level employees with expertise that is in short supply.

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The move follows an across-the-board 10 per cent salary increase given by Google late last year. Microsoft also echoed Google in shifting more of its workers’ pay into cash rather than stock.

The battle to attract and retain talent has become intense in Silicon Valley and other markets that have seen rapid growth among internet and software companies, particularly in India and China. Microsoft’s biggest pay raises are to be given in markets such as these, though the company did not lay out the range of increases it was planning.

“We will make important increases in compensation for specific populations where the market has moved the most – early and mid-level R&D, mid-level company-wide and certain geographies,” Mr Ballmer said.

In a further boost to compensation, the company said it would give bigger bonuses to more employees. While only about half of employees receive their full bonus each year, based on performance, that proportion would rise to 80 per cent as the company changes how it calculates the payments.

While competition for talent from big rivals such as Google has long challenged Microsoft’s ability to hold on to its top engineers, a new start-up boom in Silicon Valley has added to the pressure.

Microsoft stopped issuing employee stock options – a traditional form of compensation in the technology industry – and switched several years ago to granting restricted stock which gave more certainty as to when employees could receive payment.

As part of its latest changes, the company is to cut back on these stock awards and replace a small part of them with cash, in order to provide immediate reward to workers.

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