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A few days ago, Microsoft CEO Satya Nadella announced that the company would ‘nearly double’ their budget for merit-based salary raises. The Seattle-based tech giant also stated that it would increase its stock-based compensation by at least 25 per cent. The move made by Microsoft was due to the brawl that big tech companies were engaged in to retain their talent force.
But the ploy ended up working better than anticipated. While publications like Wall Street Journal were careful to say that Microsoft ‘boosted their pay,’ most Indian media outlets carried headlines stating the company was ‘nearly doubling salaries.’ Needless to say, there is a massive difference between the two.
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In the ripple effect that followed, there was mass confusion on social media due to hyperbolic misreporting.
Employees from the company were quick to distinguish myth from fact. The fact was simply this—there was a possibility that employees who had performed well according to their managers would receive a bigger chunk as a hike. The doubled budget did not indicate that all employees would be paid twice their current salaries as per a rule of thumb. While some tweeted placing the blame squarely on the shoulders of the faulty news machinery, others joked about the deceptive headlines.
Generosity or tussle for tech talent?
With US inflation close to a four-decade high in April, tech companies in the cloud computing sector were left to entice employees with promises of huge stock awards and cash bonuses. In October last year, Google’s parent company, Alphabet, adopted a cash bonus plan that started giving out bonuses of different amounts for different reasons to employees.
In February, Amazon doubled the cash-pay gap for employees. The e-commerce giant will increase its base pay for corporate executives and professional staff up from its previous maximum of USD 160,000 to USD 350,000. The company stated it would set aside its substantial stock grants and signing bonuses and leave them intact.
The recent generosity by employers shown in terms of compensation intended to halt attrition in its tracks. The two years of the pandemic spent working from home had led to employees re-evaluating the stage they were at in their careers. This, combined with a mix of the adverse impact that the lockdowns had on economies, had culminated in a shortage in the labour market. As companies grew hungrier for techies, the demand propelled salaries even higher in the sector, causing wage inflation in tech.
A report by Dice Tech Salary concluded that 61 per cent of techies saw an increase in salary last year, up from 52 per cent in 2020. While salaries for web developers increased by the largest margin (21.3 per cent), IT employees started demanding the highest salaries as their pay rose by 6 per cent within the year.
Source: Dice Tech Salary
It isn’t unheard of for techies to defect to rival tech companies during burgeoning demand. In January, it was reported that close to 100 employees from Microsoft’s augmented reality division HoloLens were poached by Meta. As Facebook repositioned the company’s focus around the metaverse and started focusing more on its AR/VR capabilities, Meta stated that it planned to hire 10,000 employees in Europe itself over the next five years.
Boost during downswing
More recently, with the tech sector making a sharp downturn and news of an impending recession, Meta announced at the beginning of this month that while it did not plan to lay off any of its employees, it would hit pause on the hiring spree it had been on. A few days back, Twitter also announced it would halt its hirings. Aside from macroeconomic factors, Twitter was also in the middle of a highly publicised takeover by Tesla head Elon Musk.
With a growing number of venture capitalists withdrawing from funding startups and reports of mass employee firings, it seems like Microsoft’s decision to convey a vote of confidence to its employees has largely worked despite the misinformation that spread like wildfire.
“This increased investment in our worldwide compensation reflects the ongoing commitment we have towards providing a highly competitive experience for our employees,” a Microsoft spokeswoman said.
A software engineer working with the company wrote a post on LinkedIn saying, “Whether it’s to compete with Amazon’s compensation revision or to just stay competitive in the technology market, this shows that the company is investing in its people. More than that, it shows the company isn’t worried about layoffs or hiring freezes.”
Another LinkedIn user noted that the move could be an indirect strategy to retain employees. “Even if employees don’t get a hike, recruiters would be reluctant to approach them or assume that they are out of their budgets already,” he said.