Microsoft told employees Tuesday that it will provide them with a special one-time cash award amounting to an additional 10% to 25% of the value of their annual bonuses for the company’s recently completed 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 to employees detailing the plan.
Executives will be excluded from the one-time cash award. The Redmond, Wash.-based company says employees at lower levels will be eligible for higher percentages to make the distribution more even.
The company made the announcement as it reported fiscal fourth quarter earnings of $64.7 billion, up 15%, and profits of $22 billion, up 10%, surpassing Wall Street’s expectations. However, the growth rate in its Azure cloud business disappointed some analysts, and Microsoft shares fell more than 5% in after-hours trading.
Microsoft isn’t disclosing specific dollar amounts or an overall budget for the special bonuses. However, depending on the circumstances, the special cash awards will amount to thousands of dollars per employee, and in some cases more.
It might be tempting to draw comparisons to the Microsoft stock options that fueled the Seattle region’s economy during the company’s original heyday in the 1980s and 1990s, although the one-time payout won’t have the same sustained impact.
Nonetheless, car dealers, real estate agents and others who benefit from discretionary spending will no doubt take note of the company’s plan. The special cash awards are expected to be distributed in September.
The company no longer publicly discloses the number of people it employs in the Seattle region. However, four years ago the number was more than 50,000 people. Even with subsequent job cuts, the company has grown globally from 156,000 employees to more than 230,000 in that timeframe.
“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’s not clear if Microsoft’s move will prompt other tech companies to follow suit, as such compensation announcements have in the past, given ongoing layoffs and the difficult market for job seekers across the industry.
Microsoft’s move comes after an eventful and tumultuous couple of years. The rise of generative artificial intelligence has vaulted the company up the list of the world’s most valuable companies, at times claiming the top spot. A 25% increase in its share price over the past year has put its market value at more than $3 trillion.
The company had more than $75 billion in cash, equivalents, and short-term investments as of June 30, down from $111 billion a year earlier due largely 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 to make layoffs, and come under intense scrutiny for security flaws. The recent CrowdStrike outage, although not caused by the company, impacted Windows machines in critical roles around the world, bringing new attention to the pervasiveness of its software.
The company’s widely used Microsoft 365 service experienced its own outage Tuesday.
Microsoft has been all over the map on employee compensation in recent years, announcing in 2022 that it would nearly double its global budget for merit-based salary increases, before making job cuts starting later that year and deciding last year that it wouldn’t be giving pay raises to full-time salaried employees.
This year, in addition to the special bonus, Hogan wrote that Microsoft will also be funding its traditional merit pay increases, regular bonuses, and stock awards.
The rate of the special bonus will be inversely proportional to levels. Generally, those who have been at the company for less time, with less accumulated stock as part of their compensation, are 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 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, and thus the differences in percentage of bonus based on level.”