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Microsoft cuts worker benefits to save $80 million a year

Updated:
REDMOND, Wash. (AP) _ Microsoft Corp. is reducing prescription drug benefits and employee stock discounts to save at least $80 million a year, workers have been told.

The cuts will ``better align our benefits with those of our competition while still keeping us ahead of the market average,'' Kenneth A. DiPietro, vice president of human resources, wrote in an e-mail to employees Tuesday.

In September, Microsoft withdrew a stock option plan that once made a number of employees millionaires but in recent years yielded little because of stagnant share prices.

Since then, Microsoft has given employees smaller amounts of stock outright.

The company also has imposed other cost-cutting measures, including reductions in travel and entertainment spending, to sustain profits in a weaker technology market.

Still untouched are such benefits as free gym memberships, free beverages on the job, well-stocked cafeterias and flexible time off. Microsoft also has more than $50 billion in cash reserves.

``Microsoft has an incredibly generous benefits package,'' said Cecily Hall, Microsoft's director of benefits in the United States. ``Employees recognize that, and I think that these changes offer a lot of choice and flexibility and therefore should not impact overall morale.''

One of the principal changes involves an option for employees to purchase discounted shares of company stock.

At present employees may buy stock for 15 percent less than the market price as calculated at either the beginning or the end of a designated time period, whichever was lower. There have been two such periods with the ``look-back'' provision each year.

Starting July 1, the discount will be reduced to 10 percent and the price will be based solely on the closing share price on the last day of each quarter, allowing four chances for stock purchases annually rather than two but without the look-back feature.

In a move designed to save about $20 million a year, Microsoft no longer will pay full price for brand-name prescription drugs if generic versions are available, DiPietro wrote, explaining that prescription drug costs are now 16 percent of the company's overall benefit budget.

Those who opt for a prescription drug instead of a Food and Drug Administration-approved generic alternative must make a $40 copayment.

A third cost-cutting move reduces vacation time accrued by employees hired after Jan. 1, 2005, to two weeks of vacation a year for the first two years, rather than the current three weeks a year.

In a fourth move with less financial impact, starting next year employees must take their four weeks of paid parental leave within six months of having or adopting a child. Workers now have a year in which to take their leave.
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