Microsoft tells employees it will hand out one-time cash awards of up to 25% of annual bonus

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Microsoft on Tuesday said it will pay a one-time performance-based cash award of up to 25% of annual bonus to rank-and-file employees.

Salaried and hourly workers at the senior director level and below will be eligible for the award, Kathleen Hogan, Microsoft's chief people officer, said in a memo distributed to employees. Junior-level employees can obtain an award amounting to as much as 25% of their bonus, while senior directors can get up to 10%.

Hogan said in the memo that Microsoft's leaders want to show recognition to workers for a good fiscal year. Microsoft reported fourth-quarter results after the close of trading on Tuesday, and said revenue increased 15% from a year earlier. For the full fiscal year, which ended June 30, revenue climbed about 16%, accelerating from 7% in fiscal 2023.

Microsoft shares are up 26% in the past year as of Tuesday's close, outperforming the Nasdaq, which has gained 20%.

The additional payouts vary in size because they are designed to be meaningful across different levels, Hogan said.

Microsoft is battling to retain employees and recruit talent in the face of a labor market that has remained resilient despite an aggressive campaign to hike interest rates by the Federal Reserve starting in 2022. In technology, engineers who specialize in artificial intelligence are among the highest in demand.

Top technology companies often offer higher compensation than Microsoft for software engineers of various experience levels, according to data compiled by one website, Levels.fyi.

Microsoft executives may also be trying to boost morale following a period of downsizing. In June, Microsoft said it was letting go of employees working on mixed reality, which includes virtual and augmented reality, after the company eliminated about 10,000 jobs in early 2023.

In 2022, as central banks were raising interest rates to stamp out inflation, Microsoft increased stock allocations for employees and nearly doubled the budget for merit-based salary bumps for employees at the senior director level and below. The following year, after revenue growth had slumped into the single digits, CEO Satya Nadella told the company's workforce that it would not lift salaries.

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