Human Capital & Careers

Microsoft Cuts Health Benefits

The company will no longer pay full price for brand-name pharmaceuticals. Prescription-drug costs are now said to make up 16 percent of the company...
Stephen TaubMay 24, 2004

Even Microsoft Corp. is cutting costs. The software giant, which has more than $65 billion in cash and short-term investments, is hoping to save $80 million per year by reducing prescription-drug benefits and employee stock discounts, according to the Associated Press.

The cuts will “better align our benefits with those of our competition while still keeping us ahead of the market average,” Kenneth DiPietro, vice president of human resources, wrote in an E-mail to employees last week, according to the wire service.

Microsoft hopes to save $20 million by no longer paying full price for brand-name prescription drugs if generic versions are available, according to the E-mail. DiPietro explained that prescription-drug costs are now 16 percent of the company’s overall benefit budget.

Employees who choose a prescription drug instead of the generic alternative must shell out $40 for a co-payment, the AP noted.

Microsoft is also cutting back on its stock purchase program. Employees currently can buy shares of Microsoft at a roughly 15 percent discount. Starting July 1, the discount will be cut to 10 percent and the price will be set in a more restrictive way.

In another cost-cutting move, Microsoft will reduce vacation time accrued by employees hired after January 1, 2005, to two weeks per year for the first two years, rather than the current three weeks per year, according to the report.

This is not the first time the company has trimmed its benefits. Last September, Microsoft stopped doling out stock options, which made many of their rank and file millionaires over the years, in favor of giving employees smaller amounts of stock outright.

The company, however, still offer such benefits as free gym memberships, free beverages on the job, well-stocked cafeterias, and flexible time off, the AP added. “Microsoft has an incredibly generous benefits package,” Cecily Hall, Microsoft’s director of benefits in the United States, told the wire service. “Employees recognize that, and I think that these changes offer a lot of choice and flexibility and therefore should not impact overall morale.”

The company has also cut back on travel and entertainment spending, the wire service noted.