Microsoft slashes employee benefits

Software giant strips back prescription drug coverage, reduces stock discount in effort to contain costs

Microsoft has announced plans to trim employee benefits in a move to cut costs.

In an e-mail to employees, the software giant said it is trimming some benefits, including reducing employee stock discounts and prescription drug coverage, to save money, according to the Associated Press.

But the company maintains its employee benefit offering is still generous, and perks like free pop and gym memberships will continue.

The cuts come despite the fact that Microsoft has $60 billion US ($82 billion Cdn) in the bank. A technology advocacy group is slamming the cuts to employee benefits. Marcus Courtney, president of WashTech, called it the tip of the iceberg of what’s to come for Microsoft employees.

But the move is being applauded by some as good news for shareholders. Analyst Charles Di Bona, of Bernstein & Co., told the AP that shareholders should be happy with the move because it shows the tech giant is willing to cut the “fat” from its budgets.

“It really does signal that they’re starting to watch the operating expenses, which is a good thing,” said Di Bona. “Every company should do that. There’s no reason to waste money.”

John Connors, Microsoft’s chief financial officer, has said overall the company hopes to save as much as $1 billion US ($1.37 billion Cdn) in the next fiscal year. The company refused to say how much money slashing the benefits package would save.

What employees are losing

Stock option plan: In the past, employees had the option to purchase stock for 15 per cent less than the market price as calculated at either the beginning or end of a designated period, whichever is lower. Each year, there were two such periods. Starting July 1, the discount will be reduced to 10 per cent and will be based solely on the closing price on the last day of each quarter.

Prescription drugs: Starting Jan. 1, employees will pay a $40 US ($54 Cdn) co-payment on brand-name prescription drugs if generic versions are available. In the past, there have been no co-payments.

Vacation time: Employees who are hired after Jan. 1, 2005, will receive two weeks of vacation for the first two years instead of the current three weeks.

Parental leave: Starting in 2005, employees must take their four weeks of parental leave within six months of having a child or adopting one. Under the current scheme, workers have one year to take the leave.

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