Microsoft Cuts Bay Area Pay

By Peter Galli  |  Posted 2002-03-14 Print this article Print

Microsoft Corp. will be reducing by 10 percent the "geographic differential" its 1,600-odd Bay Area employees earn from Aug. 1, meaning a significant cut in their paychecks.

Microsoft Corp. will be reducing by 10 percent the "geographic differential" its 1,600-odd Bay Area employees earn from Aug. 1, meaning a significant cut in their paychecks. Microsoft employees in San Francisco, Mountain View, Calif., and Foster City, Calif., were told that the "geographic differential" they are paid would be cut from 25 percent to 15 percent of their base salary, putting them on par with Microsoft employees based in New York, Microsoft officials confirmed.
Now that the technology market is in a slump and many people in the Bay Area are out of work following the dot-com collapse, Microsoft feels such a strong economic incentive is no longer necessary to retain employees.
Carol Sacks, a Microsoft spokesman at its Mountain View campus, on Thursday said the differential pay was introduced at 15 percent in Feb. 2000 before growing to 25 percent in late 2000, around the height of the tech hiring frenzy. But given that voluntary attrition has slumped, to around 9 percent at Microsofts Bay Area locations, from about 30 percent, the company felt the large differential is no longer justified, she said, adding that Microsoft had always made it clear to staff the differential could be changed or removed. An internal e-mail on the subject stated that "as a result of the latest assessment of the Labor Market in the Bay Area, we will be decreasing the Bay Area differential back to 15 percent of base salary, effective Aug. 1, 2002. Please bear in mind that its Microsofts practice to align compensation to pay approaches of industry leaders—not to the cost of living. In line with our industry, we dont pay cost of living allowances. But we may take action if unusual labor market conditions drive up pay levels," the e-mail said. Microsoft went on to caution Bay Area employees that the geographic differential would be reviewed at least annually. "Our current intention is for Microsoft to be able to adjust the differential (up or down), replace it with something else, or discontinue it altogether—based on pay approaches in the region, other changes to Microsoft pay programs, and business needs as determined by the company--decisions about the geographic differential are made at the companys sole discretion," the e-mail said.
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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