Google (Nasdaq: GOOG ) may be in no hurry to return its billions to shareholders in the form of dividends, but it will be earmarking more of its money to keep its hires happy.
In news broken by Silicon Alley Insider's iconic Henry Blodget, Google is offering all of its employees a 10% raise in pay come January. The company is also beefing up its holiday bonuses.
This isn't the kind of move that may be surprising heading out of a recession, but there's more to it than that.
Google hasn't been immune to key defections lately. Ambitious hires are flocking to Facebook, other Web 2.0 startups, or sowing their entrepreneurial oats by striking out on their own.
Heftier paychecks won't keep everybody close, but it should eat away at employee turnover.
Imagine that! Google's controversial move to reprice employee stock options last year -- a decision that infuriated many shareholders, but was supposed to keep Google hires happy -- didn't work as intended. Folks still left the company, and the stock rose organically when the market rallied.
Don't take it from me. Take it from Google.
"We've heard from your feedback on Googlegeist and other surveys that salary is more important to you than any other component of pay (i.e., bonus and equity)," reads the internal memo leaked to Blodget -- which Google has yet to deny. "To address that, we're moving a portion of your bonus into your base salary, so now it's income you can count on, every time you get your paycheck."
In other words, the bump in pay will offset performance-based variables that even Google's own employees didn't value as much as cold hard cash.
With initial reports claiming that this move may cost Google as much as $1 billion in extra compensation annually, it isn't a surprise to see Big G's stock open lower today. The financial benefits of greater retention are unlikely to cover the incremental costs.
However, let's not be so near-sighted.
What does this move really mean? If you're toiling away at Yahoo! (Nasdaq: YHOO ) or Microsoft's (Nasdaq: MSFT ) Bing, don't you begin wondering why you're not getting a 10% raise? Keep in mind that Microsoft isn't even turning a profit in its online division, so how likely is it to be able to justify a similar move?
Facebook may offer the stock options with mystery meat upside, but won't the leading social network have to bump its pay scale, too?
It may be merely coincidence that Google is jacking up its salaries just as IAC's (Nasdaq: IACI ) Ask.com is handing out pink slips, but Big G is more than raising pay: Google's raising the bar.
Is Google right or wrong to be going through with the ambitious pay raises? Share your thoughts in the comment box below.
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