Microsoft Won't Give Salary Hikes This Year, CEO Satya Nadella Says In Email

Microsoft Corp. has withheld salary hikes for all full-time employees this year, citing global macroeconomic uncertainties and shifting industry dynamics “in this new era of AI”.

“We are clear that we are helping drive a major platform shift in this new era of AI [artificial intelligence], and doing so in a dynamic, competitive environment while also facing global macroeconomic uncertainties,” Satya Nadella, chief executive officer at Microsoft, said in an internal email on Wednesday.

The Redmond, Washington-based firm is a major investor in OpenAI, the creator of ChatGPT—the viral “ask me anything” chatbot that threatens to upend jobs of coders and doctors alike. The company has already incorporated the technology in its Bing search engine.

“This year, the economic conditions are very different across many dimensions, including customer demand, the labor market, and the investments required for the next cycle of innovation,” Nadella said in the email bearing the subject line ‘Preparing for Rewards’. “Given this, we will fund our compensation commensurate with the overall market.”

“As a senior leadership, we don’t take this decision lightly having considered it over several months, and believe it is necessary to prepare the company for long-term success,” he went on to say. “While we will have salary increases for certain hourly or equivalent roles, we will not have salary increases for full-time employees this year.”

BQ Prime has seen a copy of the email that was marked to ‘Microsoft - All Employees’.

The decision to withhold salary hikes comes close on the heels of Microsoft layoffs earlier this year, when more than 10,000 employees were let go. On March 27, the company laid off 559 workers from its Bellevue and Redmond operations. On Tuesday, group firm LinkedIn cut about 716 jobs, amid plans to shut its jobs app in China.

Microsoft is also reducing bonus and stock awards to “historical averages”.

“We will maintain our bonus and stock award budget again this year; however, we will not overfund to the extent we did last year, bringing it closer to our historical averages,” Nadella said in the email. “We will continue to emphasize and recognize exceptional performance with high rewards, and to do so, managers will need to differentiate pay for performance within their allocated budgets.”

“The same principles apply to the senior leadership team and me. This will be reflected both in the absence of salary increases and in the level of annual performance-based bonuses for the SLT, which will be substantially lower than last year.”

This is practically a pay cut for us, an India-based Microsoft employee told BQ Prime on the condition of anonymity. 

“We are practically at the end of our annual appraisal cycle,” this  person said. “First came the layoffs, and now this.”

According to the Microsoft employee, accepting the new pay structure is no guarantee that there won’t be further layoffs if the market doesn’t turn. 

“We are disappointed,” this person said.

When contacted by BQ Prime for a comment on the matter, a Microsoft India spokesperson said such critical decisions need to be taken in a “dynamic economic environment”.  

“As part of that effort, we are funding our compensation to align with the overall market,” the spokesperson said. “While we will not be providing salary increases for our full-time salaried employees this year, we will continue to invest in our employees through promotions, bonus and stock.”