It's hard to imagine a bellwether company that sits on a huge cushion of cash whittling down its employees' benefits, but Microsoft (NASDAQ:MSFT) is doing it, news reports said today. It's all in the name of saving a whopping $80 million in expenses.
Saving $80 million should come in handy for the company around earnings time. Here at the Fool, we've tracked earnings announcements where Mr. Softy's profits were flagging, but take last quarter's earnings-- they were weighed down by stock compensation expenses, the much-talked about European Commission fine, and the company's settlement with Sun Microsystems (NASDAQ:SUNW).
Sure, paring down employees' benefits sounds a bit alarming, or maybe just plain cheap -- and maybe more so when you're talking about a company as big, aggressive, and cash-rich as Microsoft. Meanwhile, rival Google provides almost surreal benefits for its peeps, like doctors, laundry machines, and free meals. "We believe it's easy to be penny-wise and pound-foolish with respect to benefits that can save employees considerable time and improve their health and productivity," it says in its SEC filings.
Is Microsoft abusing its people? Not hardly. Many of you might scoff, comparing some of its perks to your own daily grind. Microsoft still provides cafeterias, free beverages, free gym memberships, and one of the major benefits of the Internet age -- the almighty flex time -- among other things.
The changes include a reduction in the discount its employees get on Microsoft stock; a switch in prescription coverage to require a $40 co-pay for a brand-name drug when a generic one is available; and, for employees hired starting next year, a cut in beginning vacation allotment to two weeks from three.
Is now the time to mess with workers? After all, Microsoft faces some hot competition, whether you're talking search or gaming or any variety of things in between. Meanwhile, it's come under a lot of heat not only for antitrust practices but also for its constant wrangling with Windows security flaws.
Quality employees are the core of a competitive company -- and happy, quality employees, even more than that. That's a mantra that's been repeated by many successful companies, not the least of which is Starbucks (NASDAQ:SBUX).
Reducing employee benefits seems a move more fitting when "recession chic" included cutting costs with brutal strokes. That's so last year. But, of course, look who we're talking about. It's doubtful that a powerhouse like Microsoft will see defection over these cuts.
However, companies that don't have as much credibility as Microsoft, Google, or Yahoo! (NASDAQ:YHOO) had better think before following this precedent. If the economy continues to heal and jobs become plentiful again, some companies are going to have to work darn hard to keep or woo quality employees. After all, recent surveys show that several years of recession (and corporate cost cuts) later, lots of workers are just itching to find greener pastures.
Is this a morale buster or a profit boon -- cheers or jeers for Microsoft's move? Strike up a conversation with other Fools on the Microsoft discussion board.
Alyce Lomax does not own shares of any companies mentioned.
