Microsoft Reinstates Performance Raises Amid AI Surge

Microsoft has announced plans to reintroduce performance-based raises starting from this year’s review cycle.

by Faruk Imamovic
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Microsoft Reinstates Performance Raises Amid AI Surge
© Getty Images/Jeenah Moon

Microsoft has announced plans to reintroduce performance-based raises starting from this year’s review cycle. This move marks a significant change from the previous year's freeze on salary increases, aiming to reward and motivate its workforce amidst a backdrop of technological advancements and market dominance.

Navigating Compensation Challenges

Last year, the tech giant made headlines not just for its technological innovations but also for freezing base-pay raises and reducing budgets for bonuses and stock awards. This decision came during a period of significant layoffs across the technology sector and was met with considerable internal criticism from employees.

The discontent centered around compensation issues, particularly as competitors like Amazon and Nvidia appeared to offer more attractive remuneration packages. In response to the growing dissatisfaction and in a bid to retain talent, Microsoft had previously increased stock grants for employees up to level 67, although some considered these raises to be insufficient.

A Turnaround in Employee Compensation

This year, Scott Guthrie, the Executive Vice President of Microsoft’s cloud and AI group, conveyed at an employee meeting on April 30 that the company would be increasing merit-based compensation.

While the announcement has not been made companywide, it reflects Microsoft's recognition of the need to better align employee rewards with performance, especially given the company's recent surge to a $3 trillion valuation spurred by the generative-AI hype.

Microsoft’s annual review cycle, which began in April, includes performance reviews that directly influence compensation adjustments. Employees are set to receive notifications about their performance-related compensation adjustments around August 15, with the actual payouts scheduled for September 15.

This change comes at a pivotal time for Microsoft as it continues to capitalize on its advancements in cloud and artificial intelligence technologies, further solidifying its position as the world's most valuable public company.

By revisiting its compensation strategy, Microsoft aims not only to sustain its innovative edge but also to ensure that its success is shared among those who fuel it.

Microsoft
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