Microsoft CEO Satya Nadella tells employees about upcoming salary increases

Microsoft CEO Satya Nadella speaks during Microsoft’s annual shareholder meeting at the Meydenbauer Center on November 28, 2018 in Bellevue, Washington. Microsoft recently overtook Apple, Inc. to become the world’s most valuable publicly traded company.

Stephen Brashear | Getty Images News | Getty Images

Microsoft CEO Satya Nadella told employees on Monday that the company was increasing compensation as the labor market tightens and employees face rising inflation.

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

“People come and stay at Microsoft because of our mission and our culture, the meaning they find in the work they do, the people they work with, and how they are rewarded,” said the spokesperson to CNBC in an email. “This increased investment in our global compensation reflects our continued commitment to providing a highly competitive experience for our employees.”

Inflation jumped 8.3% in April, remaining near a 40-year high. Meanwhile, the US economy continues to add jobs and unemployment has been steadily falling, hitting 3.6% last month. Tech companies have responded with wage increases.

Alphabet, Google’s parent company, is adjusting its performance system to increase workers’ salaries, while Amazon has pledged to more than double the company’s maximum base salary for employees.

Nadella told employees that the company “nearly doubles the overall merit budget” and allocates more money to people early and mid-career and those in specific geographies. He said the company is increasing annual stock ranges by at least 25% for employees level 67 and below. This includes several levels in the enterprise software engineering role hierarchy.

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

While the biggest tech companies have raised wages to try to retain talent, some smaller companies have made layoffs as the war in Ukraine and supply shortages weigh on their businesses. Carvana and Robinhood are among those cutting staff.

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