Microsoft cuts back on worker benefits

Posted by bink on May 20 2004, 3:05 PM. Posted in Microsoft Corp.

Goal is to reduce expenses by 21%Microsoft Corp., the world's largest software company, will cut vacation time for new employees and charge US workers a $40 copayment for brand-name prescription drugs as part of plans to cut costs as sales growth declines.

Microsoft also will reduce the discount for employee stock purchases to 10 percent from 15 percent starting in July, spokeswoman Tami Begasse said. Using generic drugs can save Microsoft as much as 80 percent in prescription costs compared with brand-name drugs, she said.

Chief financial officer John Connors wants to reduce operating expenses by 21 percent next year to about $21.9 billion to boost profit as sales slow. Microsoft has forecast revenue to grow as little as 3.4 percent next fiscal year, compared with the 14 percent it expects for the year ending next month.

"There is a drive toward cost-cutting across the whole company, and this is part of that," said Matt Rosoff, an analyst at the Kirkland, Wash., market research firm Directions on Microsoft. "It sounds like they are just trying to stay in line or a little bit ahead of industry standards."

The moves to reduce employee benefits by Microsoft could have an impact throughout the industry as the software giant often serves as a bellwether for looming changes among technology companies.

Begasse declined to provide a figure for how much Microsoft expects to save overall from the changes.

US employees hired starting in 2005 will receive two weeks of vacation for their first two years at the company, down from three weeks, Begasse said.

The changes are part of a regular review of benefits, she said.

The company has been considered to have "an excellent benefits package," Rosoff said.

Microsoft provides healthcare and prescription drug coverage. The company also offers one month paid and two months' unpaid infant care leave and pays for workers' gym memberships. It will also pay for most of a weight-loss program for employees who qualify.

"With these changes Microsoft will continue to offer an industry-leading benefits package," Begasse said