Leaked Microsoft memo tells managers not to use budget cuts as an explainer for lack of pay rises: ‘Reinforce that every year offers unique opportunity for impact’

Story by Orianna Rosa Royle •14h

As the tech company cuts the budget for bonuses and freezes salaries, managers are being asked to skim over that fact during lackluster performance reviews.

© Loren Elliott—Getty Images

Microsoft employees were already expecting lackluster pay rises. In a company-wide email sent earlier this year, the tech company’s CEO Satya Nadella warned staff of salary freezes and cuts to the bonus budget.

But despite previous transparency around the cost-cutting measures, employees enquiring about how the budget cuts have impacted their performance review will now be fobbed off.

According to leaked guidance viewed by Insider, managers are being ordered to dodge such questions in the name of company culture.

"It's natural for employees to ask questions about budget given the decisions shared in Satya's email," the guidance reportedly states. "However, it's most important to focus discussions with direct reports on their impact for the past fiscal year and directly tie it to their rewards."

Managers should not use the budget cuts as an "explanation" for compensation decisions for individual employees and instead should emphasize that the employee's own "impact" determines "rewards."

"Using budgets or factors besides the employee's impact as an explanation for an employee's rewards will erode trust and confidence within your team," the guide cautions. "Reinforce that every year offers unique opportunity for impact, and we increase our high expectations, regardless of our budget."

Microsoft didn’t respond to Fortune’s request for comment.

A transparency U-turn

The latest guidance to Microsoft managers comes in spite of the fact that this year’s subpar pay review is intrinsically linked to the business's budget cuts.

In May—just after the company's annual review cycle began with performance reviews in April—Nadella told staff that due to the current economic conditions, full-time employees won’t see an increase in their wages this year.

Typically, Microsoft employees are told how their performance affects their compensation in August with their payout taking effect from September, but this year, not only will most workers see their salary stagnate, but their bonuses are also likely to be significantly smaller.

Nadella’s email cautioned that the company will not "overfund" bonuses and stock awards like it did last year, meaning the bonus and stock award budget has been reduced.

“As a senior leadership team, we don't take this decision lightly having considered it over several months, and believe it is necessary to prepare the company for long-term success,” Nadella wrote.

In a separate leaked email back in May, Microsoft’s chief people officer Kathleen Hogan told managers to allocate less than usual “exceptional rewards”.

"Fewer employees will be able to receive exceptional rewards, and more will need to be at the middle of the range," she reportedly wrote in the memo.

Meanwhile, Microsoft’s chief marketing officer Christopher Capossela told employees angry about the lack of salary raises that their best way to increase their pay is to make the stock go higher—after cashing out $4.4 million worth of stock.

This story was originally featured on Fortune.com