Microsoft CEO Satya Nadella tells employees that pay increases are on the way

Key Points
  • CEO Satya Nadella announced in a memo on Monday that changes are coming to the company's pay structure.
  • Microsoft has been accelerating growth in research and development as it takes on Amazon in cloud computing.
Microsoft CEO Satya Nadella speaks during the company's annual shareholders meeting, Nov. 28, 2018, in Bellevue, Washington.
Stephen Brashear | Getty Images News | Getty Images

Microsoft CEO Satya Nadella told staffers on Monday that the company is raising compensation as the labor market tightens and employees contend with increasing inflation.

A spokesperson for the company confirmed the pay increase, which was reported earlier by GeekWire.

"People come to and stay at Microsoft because of our mission and culture, the meaning they find in the work they do, the people they work with, and how they are rewarded," the spokesperson told CNBC in an email. "This increased investment in our worldwide compensation reflects the ongoing commitment we have to providing a highly competitive experience for our employees."

Inflation jumped 8.3% in April, remaining close to a 40-year high. Meanwhile, the U.S. economy continues to add jobs and unemployment has steadily been falling, reaching 3.6% last month. Tech companies have been responding with salary bumps.

Google parent Alphabet is adjusting its performance system in a way that will bring higher pay to workers, while Amazon committed to more than doubling maximum base pay for corporate employees.

Nadella told employees that the company is "nearly doubling the global merit budget" and allocating more money to people early and in the middle of their careers and those in specific geographic areas. He said the company is raising annual stock ranges by at least 25% for employees at level 67 and under. That includes several tiers in the company's hierarchy of software-engineering roles.

In the first quarter, Microsoft increased research and development costs, which include payroll and stock-based compensation costs, by 21%. The company bolstered spending in cloud engineering as Microsoft tries to keep pace with Amazon Web Services. Research and development growth has accelerated for five consecutive quarters.

While the biggest tech companies have been lifting pay to try and retain talent, some smaller companies have been implementing layoffs as the war in Ukraine and supply shortages strain their businesses. Carvana and Robinhood are among those that are cutting staff.

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