This video will help you understand how you get paid at Microsoft. It will help new employees and individuals interested in working at Microsoft gain a better understanding of what their compensation structure could look like.
How are Microsoft employees paid? (the basics)
There are a few different ways that Microsoft employees are compensated; base salary, annual cash bonuses, on-hire cash bonus, and stock awards (on-hire and annual).
Base salary: This is very straight-forward, you receive a base salary that is paid out twice each month.
Annual cash bonus: Annual cash bonuses are paid out in September of each year, these range typically between 0 – 40% of eligible salary.
On-hire cash bonus: If you recently joined Microsoft, you may have also received an on-hire cash bonus. These bonuses are typically paid out within the first 30-60 days of employment. On some occasions, these bonuses can be split into two separate payments.
Stock Awards: There are two different types of stock awards: On-hire stock award and Annual stock award. More than likely each of these types of awards will have their own vesting schedule.
How Do Your Salary, Bonuses, and Stock Awards Add Up at Microsoft?
Here is an example of a compensation timeline for the first three years of an employee’s career
Your Salary and Bonuses
Once you have been hired at Microsoft you will begin to receive your salary and if awarded you will also receive your on-hire cash bonus (this could be paid within two separate installments). Within your first year, you may also be eligible to receive an annual cash bonus. These are awarded every September. Your eligibility to receive this bonus may depend upon when you joined Microsoft
Your Stock Awards
On-hire stock awards – The typical vest for these awards is 25% over four years, with one vest occurring annually on your employment anniversary. You will not receive on-hire stock award shares until one year after employment.
Annual stock awards – Each August, Microsoft employees are also eligible to receive new stock awards. If you started early in the year, you could receive your first stock award in November. These stock awards vest 20% per year, on a quarterly basis over a five-year time period. An easy way to remember when your annual stock awards are vesting is the acronym: FMAN (February, May, August, and November)
The vesting schedule for on-hire stock and annual stock awards can create a positive waterfall effect for Microsoft employees who have multiple stock awards vesting over the course of five years. As you can see in the chart below, the stock vests essentially stack up on top of each other, which can give savvy Microsoft employees the opportunity to use this form of compensation to cover their living expenses while investing their base salary.
An Example of How Microsoft Compensation Works
Now we’ll take a look at an example of what your Microsoft compensation could look like in the first six years of employment. For simplicity, our example employee receives a base salary of $195,000 and earns a cash bonus of $39,000 each year. Additionally, this employee also received an on-hire cash bonus of $100,000.
As you can see in the chart below, this on-hire bonus makes up a large portion of their compensation in year one. This chart demonstrates the waterfall effect we mentioned above. In year one the employee received an on-hire cash bonus to compensate for the fact that the on-hire stock award will not begin to vest until year two. This employee’s on-hire stock award continues to vest during years two through five and they also see their annual stock awards increase each year. Typically, there is a slight drop-off in year 6 when the on-hire vests go away.
Long-term Financial Planning for Microsoft Employees
We encourage Microsoft employees to develop a strategy for managing your salary, bonuses, and stock awards based on your financial goals and needs. Please feel free to schedule time with our team to discuss any questions you may have.