The Real Cost of Microsoft's Severance Overpayment
Category: Blog - February 25, 2009
The news that Microsoft overpaid severance to some of its recently laid off employees was destined to make headlines when Microsoft asked for the money back. The result of an "inadvertent administrative error," the company confirmed the incident but initially declined to provide specifics. When news of the incident quickly spread the company was heavily criticized, and the zingers wrote themselves (e.g., did they use Excel?).
As a result, Microsoft backed away from the payback request, allowed the overpaid employees to keep the money and shared more details about the blunder-25 people were overpaid by up to $5,000 each. As the Wall Street Journal's Nick Wingfield put it, "Microsoft [learned] there's a fine line between fiscal responsibility and insensitivity."
For a company that recently reported $8.4 billion in cash on hand, asking laid off employees to pony up $125,000 (assuming all 25 were overpaid at the high-end of the range) doesn't seem well thought out. This incident provides an unfortunate yet timely reminder of how important it is for companies to:
- Take extra care when communicating about people's jobs, pay or benefits. These items are personal-very personal-and should be handled with caution and sensitivity. When they aren't, the news will quickly spread even if you're not one of the world's best-known brands.
- Coordinate every aspect of employee communication. Every department should know that when sharing news about jobs, pay and benefits, they must coordinate their efforts with Communications or Public Relations and Human Resources. In this case, Microsoft's HR head didn't know the letters had been sent until a copy of one was posted to TechCrunch.
- Treat all employees with respect regardless of status. Just because employees have been laid off, are on leave or have retired, doesn't mean they deserve anything less than a company's full consideration. The marketplace still connects those employees to your company. Put another way: All of the news headlines included the word Microsoft.
To their credit, Microsoft's head of HR did personally contact each employee to tell them Microsoft changed its mind about repayment. And headlines about that change of heart spread quickly, too. Still the question now is: How much more than the overpaid $125,000 did this incident really cost Microsoft?
Kellie Due Weiland
Account Director
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