Microsoft informed employees on Tuesday of a special one-time cash award, equal to an additional 10% to 25% of their annual bonuses for the company’s recently concluded fiscal year.
“The senior leadership team and I want to recognize the tremendous work and impact of our people who delivered a terrific year of solid execution and world-class innovation,” wrote Kathleen Hogan, Microsoft’s chief people officer, in a companywide memo detailing the plan.
Executives will be excluded from the one-time cash award. The Redmond, Wash.-based company stated that employees at lower levels will be eligible for higher percentages to ensure more equitable distribution.
The announcement coincided with the reporting of fiscal fourth-quarter earnings of $64.7 billion, a 15% increase, and profits of $22 billion, up 10%, exceeding Wall Street’s expectations.
Microsoft isn’t disclosing specific dollar amounts or the total budget for the special bonuses. Nevertheless, depending on individual circumstances, the special cash awards will amount to thousands of dollars per employee, and in some instances, even more.
It might be tempting to compare this with the Microsoft stock options that stimulated the Seattle region’s economy during the company’s peak years, although the one-time payout won’t have the same long-lasting impact.
Nonetheless, car dealers, real estate agents, and others who benefit from discretionary spending will certainly take note of the company’s plan. The special cash awards will be distributed in September.
The company no longer publicly discloses the number of its employees in the Seattle region. However, four years ago, the figure exceeded 50,000. Even with subsequent job cuts, the company’s global workforce has grown from 156,000 employees to more than 230,000 during that period.
“All Microsoft employees in levels 67 and below, including hourly and equivalents, who receive FY24 rewards will be eligible to receive a special one-time only cash award in addition to their annual rewards,” Hogan wrote. “This special one-time cash award will scale based on the employee’s FY24 impact.”
It remains uncertain whether Microsoft’s move will prompt other tech companies to follow suit, especially given ongoing layoffs and the challenging job market across the industry.
Microsoft’s announcement follows an eventful and tumultuous couple of years. The rise of generative artificial intelligence has elevated the company to one of the world’s most valuable, sometimes claiming the top spot. A 25% increase in its share price over the past year has placed its market value at more than $3 trillion.
As of June 30, the company had over $75 billion in cash, equivalents, and short-term investments, down from $111 billion a year earlier, mainly due to its $68.7 billion acquisition of Activision-Blizzard in October.
“We recognize our FY24 success is a direct result of the incredible focus, creativity, and collaboration of our people and our collective efforts as One Microsoft,” Hogan wrote. “We are grateful for your dedication to our mission so that together we can continue to empower everyone around the world.”
At the same time, the company has continued layoffs and faced scrutiny for security flaws. The recent CrowdStrike outage, while not caused by Microsoft, affected Windows devices in critical roles globally, highlighting the pervasiveness of its software.
Microsoft has fluctuated in its employee compensation strategies in recent years. In 2022, the company announced plans to nearly double its global budget for merit-based salary increases, but later that year it began implementing job cuts and decided last year against giving raises to full-time salaried employees.
This year, in addition to the special bonus, Hogan mentioned that Microsoft will also fund its traditional merit pay increases, regular bonuses, and stock awards.
The special bonus rate will be inversely proportional to employee levels. Generally, employees who have been with the company for less time, and thus have fewer accumulated stock as part of their compensation, will be eligible for a higher percentage.
“For example, employees in higher levels, such as 67, would receive a cash award equivalent to approximately 10% of their annual bonus, whereas employees at level 61 and below would receive a cash award equivalent to approximately 25% of their annual bonus,” Hogan wrote. “As the SLT considered this award, our goal was to ensure that everyone eligible receives a meaningful amount at all levels, resulting in different bonus percentages based on level.”
