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Microsoft Offer Compensation Components
Before starting any negotiation, it is critical you fully understand the compensation components offered. A typical job offer for a tech role at Microsoft (e.g. Software Engineer) should contain the following monetary components:
This is what an example Microsoft SDEII offer looks like over a 4-year period:
The high-level overview of compensation is important as recruiters often leave out components (e.g. signing bonus). But, there are also some key differences within these components at Microsoft vs FAANG companies.
Microsoft Base Salary
Microsoft's base salary component is similar to other big tech companies. There is a base salary band associated with each role/level/location. The size of the band increases with seniority - at junior levels it is quite narrow. Microsoft is often only slightly lower on base salary relative to FAANG companies. It is possible to negotiate this component, but the increase will typically be smaller than equity and signing bonus increases. Base salary at Microsoft is paid bi-weekly in the United States.
Microsoft Signing Bonus
Many Microsoft offer letters don't include a signing bonus by default. It's a common recruiter trick to leave it out of the initial job offer. This can be a good way to increase your offer since Microsoft is less flexible on recurring increases (i.e. base salary and equity).
For most technical roles at Microsoft, it is possible to negotiate a higher signing bonus even if it's not in your initial offer. The two most helpful pieces of leverage are 1) competing offers 2) retention bonuses at your current company. As a reference, Microsoft signing bonuses are typically much lower than Facebook signing bonuses, but only slightly lower than Google.
When signing bonuses are larger than $50,000, Microsoft will usually split them over two years. By default, the signing bonus will be split into two equal parts. Microsoft certainly has a strong preference to keep this even split, but with the right approach we have been able to negotiate this to be weighted more heavily towards the first year. This is true for $50K signing bonuses all the way up to the largest signing bonuses we have negotiated, which were well over $500K. However, it's important to time this request correctly. If you attempt to change the distribution too early in the negotiation, you risk leaving substantial amounts of money on the table, as Microsoft will focus on whichever of your requests will cost them the smallest amount of money.
Microsoft will pay your signing bonus in your first month of employment - unlike Amazon which is prorated. Notably, Microsoft can clawback your entire signing bonus if you leave before the 1-year mark. If you have a multi-year signing bonus, each part is subject to a separate claw-back period. For example, if you had a $35,000 signing bonus in the first year and $25,000 in the second year and you left after 1.5 years, you would be required to pay back your second year signing bonus as the claw-back period hadn't expired for it yet. This ultimately requires you to say for multiple years or risk returning your signing bonus. We have been able to assist clients who were leaving Microsoft during a claw-back period to be exempt from returning their signing bonuses. However, it's not guaranteed and requires a good relationship with your current manager. In comparison, Google, Facebook or Amazon rarely clawback your entire signing bonuses. Below I've included the exact wording from a Microsoft SDE offer we negotiated recently.
"We are pleased to offer you a signing bonus in the total gross amount of $25,000.00 USD, less applicable tax withholdings. This bonus will be paid to you within 30 days following your start date. As we have discussed, this represents our genuine interest in your joining Microsoft. Please note that this signing bonus will be considered taxable income, and payroll taxes will be withheld. In the unlikely event that you leave the company of your own volition prior to completing 12 months of employment, the $25,000.00 USD will not be earned and must be returned to Microsoft in full. By signing this offer letter, you hereby authorize Microsoft to withhold this amount from any monies owed to you."
Microsoft Equity (RSUs)
Equity is the component where Microsoft pay is the least comparable to FAANG companies. An E5 engineer at Facebook with a strong offer can expect ~$200K per year in equity, whereas at Microsoft a level 64 averages ~$60K per year.
Despite the low starting point, it is definitely worth your while to negotiate this component as we have seen some truly huge increases. For example, we helped a level 65 program manager increase her equity from $125K (over 4 years) to $500K! There were some key factors that led to this increase which will be outlined in the negotiation tips section at the bottom.
Microsoft, like many big tech companies, vests equity evenly over 4 years (returning SWE interns have a different vest schedule). This means if you are granted $200K RSUs, you will receive the following:
- Year 1: 25% ($50K)
- Year 2: 25% ($50K)
- Year 3: 25% ($50K)
- Year 4: 25% ($50K)
You will receive your first equity vest at the 1-year mark and then 6.25% will vest every quarter thereafter. This is slightly less convenient than Facebook which vests every 3 months and Google which vests every month (for offers with >$160K equity) .
Here is the specific stock award wording from a Microsoft offer letter.
As mentioned in the image above, the actual number of shares you receive will be based on the stock price in the month you join. You can look at the average stock price over the past 30 days to get an estimate of the number of shares you will receive, but this can change significantly.
Microsoft Performance Bonus
Microsoft has a different approach to performance bonuses vs Google and Facebook. To start, they don't usually list the target bonus in the offer letter. Instead, they often list a wide range as your potential bonus. We recommend asking your recruiter what the target number is, though in most cases the answer is simply the middle of the range. Here is the wording from a Microsoft offer letter:
"You will also be eligible for an annual bonus, ranging from zero to a maximum of 40.00% of your bonus eligible salary during the rewards period based on your performance. Your first eligibility for a bonus will be determined based on your start date and will be reviewed each year per Microsoft eligibility rules."
For most teams within Microsoft, in order to increase your bonus (e.g. from 10% target to 15%) the manager needs to decrease someone else's bonus proportionally (e.g. from 10% to 5%). This makes managers less likely to give above target bonuses.
This component is not negotiable, but it's important to include it in your total compensation when comparing to other offers, especially when comparing to companies like Amazon that are much less likely to pay performance bonuses.
Microsoft Stock Refreshers
Targets for stock refreshers are not included in the offer letter and therefore are more difficult to evaluate when comparing total compensation between multiple companies. However, as a general rule, Microsoft provides very small refreshers. Below are the target numbers from 2020. All refresher grant values vest over 5 years vs. the industry standard of 4 years.
- L59 = $3000
- L60 = $4500
- L61 = $6500
- L62 = $11,000
- L63 = $17,000
- L64 = $24,000
- L65 = $36,000
- L66 = $75,000
- L67 = $168,000
Industry Compensation Data
Rora has helped negotiate a wide range of offers at Microsoft. Candidates of course need to know the latest role-specific salary information like the Microsoft data scientist salary or the Microsoft technical program manager salary. However, it can also be useful to understand these salary trends at the industry level. Hence, Rora has compiled that data for different roles setting the senior (L5) level as the benchmark.
Remember, the data points above are industry wide, not specific to Microsoft. There are many company specifics at play here. For example, a Microsoft program manager salary is above industry average. However, most other roles are often paid below average and certainly lower than companies like Facebook.
Microsoft Remote Work
Does Microsoft have remote roles? Yes. Prior to the pandemic, the vast majority of Microsoft employees were in-person in Redmond. However, even before the pandemic, Microsoft had some teams that were remote. Often those teams came to be remote due to unique circumstances. For example, Microsoft purchased Deis Labs which had remote employees, and those teams were allowed to continue hiring remote employees indefinitely. Even after Deis Labs merged with the Azure Kubernetes Team, which was previously based in Redmond, they were allowed to hire for remote roles and the entire team eventually became remote first.
During the pandemic, Microsoft increased the number of permanently remote roles dramatically. Although they are far from the leaders in being remote friendly (that prize goes to companies like AirBnb and Dropbox), there are many teams that are willing to hire for 100% remote roles. At Microsoft, it’s an org and team decision to allow you to work remotely. Since you will almost always interview with a specific team at Microsoft (not a generic hiring process), you should check for remote friendly roles in the job description or ask the recruiter.
Once you join Microsoft, you can also work with your manager to come up with a remote policy that works for both of you, but know that your manager has the power to decline remote requests.
Microsoft does change compensation fairly aggressively based on location. If you are an existing employee, they will change your base salary based on your location but your previous equity grants and signing bonuses won’t be changed. If you are negotiating a new Microsoft offer, pay bands are set based on tier of location (e.g. Bay Area/NYC is tier 1, then Seattle/Redmond tier 2, and so on). Expect a harder, up-hill battle for remote negotiations, but they are possible with the right justification and approach. Many recruiters will claim that they are maxed out or unable to negotiate for your particular location. It’s important to keep a great relationship with your recruiter (i.e. don’t refute what they say directly) but manage the conversation carefully because you can still negotiate great remote offers at Microsoft
Microsoft Work-Life Balance
Microsoft is famous for having good work life balance. While this is certainly true, as with any big company, work life balance can vary significantly from team to team. Microsoft has more than 50,000 technical employees and there are some teams that work incredibly hard on a consistent basis.
If work life balance is a priority to you, it’s definitely possible to find the right team. When you are interviewing, focus on teams with limited or good on-call rotations. In Azure, Microsoft’s cloud computing division, you will find more teams - but certainly not all - that work longer and harder hours. Those teams will often be marked by tough on-call cycles and will typically either be a) high growth, high importance teams to Azure (e.g. Azure Kubernetes Team or Azure RDMA) or b) on the critical path for data, computing or networking (e.g. Azure VFP Networking). Teams that you should also watch out for are low ring but not achieving their up-time. At Microsoft, each service is considered a different “ring” and the reliability of each service has to meet minimum thresholds at a given ring level (ring 0 is required to have the best uptime). By setting this system, Microsoft can ensure that their products are always reliable. Some teams in ring 0 ship code infrequently and are very stable. These are, counter to many people’s belief, teams with good work-life balance. However, teams that aren’t meeting their ring up-time or are attempting to move into a more reliable ring tier, generally have a lot of pressure and limited WLB.
If you aren’t sure about the ring level, on-call rotation, code shipping practices or work life balance on a team at Microsoft, ask. Some recruiters will know, every manager will know, and if you feel uncomfortable asking a manager, then ask to chat with an engineer on the team.
As a final note, even the teams with worse work life balance at Microsoft often have it much better than teams at Amazon or Facebook. Work flexibility is high even on high pressure teams. It’s rare to work weekends and many team members will still leave early to pick up their kids / for personal events and then sometimes log back in during the evening.
We consider the WLB at Microsoft to be one of the best in the industry.
Microsoft Negotiation Process
Candidates often find it helpful to have a high-level overview of the negotiation process. However, this does vary by candidate, with one key vector being seniority. We've included a quick overview of the Microsoft levelling system below.
- Level 59 & 60 - Software Development Engineer (often new grads)
- Level 61 & 62 – Software Engineer II
- Level 63 & 64 - Senior Software Engineer
- Level 65 & 66 & 67 - Principal Software Engineer
- Exec Levels - more details below
If you have not yet received an offer from Microsoft there are a few critical mistakes to avoid:
- Do not share your current compensation. In many states (e.g. California) it is illegal for companies to ask this, so you are certainly within your rights to say "I do not feel comfortable sharing that information".
- Do not share your compensation expectations. Microsoft recruiters will sometimes frame this as "seeing if you are a fit for the role". However, it is in your best interest to deflect this question until Microsoft has extended an offer. One possible response is "right now I'm focused on the interview process and don't have a number in mind, but I'm confident we will be able to get to a number that works for both of us."
With that out of the way, let's discuss the process for Microsoft tech employees.
- After completing your onsite interview, you will often hear back from your recruiter within a few days.
- On the initial call post-interview (i.e. the offer call), Microsoft recruiters usually share the initial offer package. Sometimes when you have competing offers they attempt to withhold it until you give them expectations. It is usually possible to pushback and get the initial offer.
- During the offer call, the recruiter will ask you how you feel about the offer and discuss timelines. Microsoft is typically aggressive on timelines and will often threaten candidates with exploding offers
- We recommend you take a day to digest the initial offer and consider the best point of leverage for your counter offer discussion
- You will then setup your second call with the recruiter to discuss the offer. On that call you will disclose your counter offer. The recruiter will likely push back and at Rora we build a tree diagram unique to your situation with the most likely objections and the optimal responses to those objections. The goal is to get the recruiter to take your counter-offer back to the team
- Typically you will hear back in within a week with their "final" offer. It is possible to continue the negotiation at this point, but it often requires new information (e.g. you just received a higher offer from Amazon)
Microsoft Director Negotiations
Microsoft salary negotiations for executives (director, partner, VP, etc.) are some of the most confusing and challenging in tech. Below we will walk through exec level structures, exec compensation and exec negotiations.
Microsoft Exec Levels
Titling for executives is incredible messy at Microsoft. Generally, we consider executive to begin at the Partner level, which equates to L68 and L69. However, Microsoft has many other titles at the same level. The purest, theoretical titling for Microsoft employees on the management track is the following:
- L68-L69: Partner, Partner Director, SDE Group Manager, Partner General Manager
- L70: Vice President (VP)
- L80: Corporate Vice President (CVP)
- L81: Executive Vice President (EVP)
For individual contributors the titling looks a bit different:
- L68-L69: Partner
- L70: Distinguished Engineer
- L80: Technical Fellow
- L81: Senior Technical Fellow
It’s rare to join Microsoft on the individual contributor (IC) track as a Distinguished Engineer or Technical Fellow (Partner is much more common). Both Distinguished Engineer and Technical Fellow positions are only given to people who have reshaped computing (either at Microsoft or beyond). There are two particularly confusing things we should clear up about these levels. First, you can be a Distinguished Engineer and hold a management title (e.g. CVP). Distinguished Engineer is almost like a badge you earn, and if you choose to go into management later on, you still get to keep your badge (i.e. they aren’t mutually exclusive). A great example of this is Brendan Burns who created Kubernetes. He became a Distinguished Engineer a few years after joining Microsoft and is now a CVP and Distinguished Engineer. Second, the Senior Technical Fellow position is essentially impossible to achieve. Dave Cutler, the Microsoft computing legend who led the development of Windows is the only Senior Technical Fellow. Originally, Dave was the only Technical Fellow and as others started to receive the designation, Microsoft created Senior Technical Fellow to help distinguish Dave’s contributions. Dave is now 80 years old and after ~50 years is still contributing code at Microsoft!
Partner is most frequently used for technical roles while Partner Director and Partner General Manager are often associated with non-technical roles at Microsoft. However, there is no strict ruling on titling at Microsoft and we’ve supported negotiations for almost identical roles (e.g. L68 Engineers) that were titled Partner Directors, Partner General Managers and Partners.
It’s worth noting that often there is a distinction between Partner GM and GM or Partner Director and Director at Microsoft because GM and Director are considered L70 and anything with Partner is L68/L69. In practice, titling is so messy at Microsoft that you can’t rely on this always being the case (e.g. you will find people with Director titles at L68).
After partner, Microsoft has introduced a new level called Vice President. It’s distinct from Corporate Vice President or Executive Vice President. VPs are L70 at Microsoft. It’s a new title introduced by Satya in late 2020 to stay consistent with the rest of the industry. When the title was introduced, some General Managers and Directors (however not Partner General Managers or Partner Directors) were retitled to VP. VP has quickly become a prominent title at Microsoft due to the number of internal employees that were retitled.
After VP is Corporate Vice President (CVP) which is L80 and then Executive Vice President (EVP) which is L81. The majority of the C-suite at Microsoft are technically EVPs, for example Chris Capossela, one of our favorite leaders at the firm, is both an EVP and the CMO of Microsoft. There are several hundred CVPs at Microsoft and only a few dozen EVPs.
You might wonder, why the jump from L70 to L80. Corporate roles in the US start at L59 (they start below L59 outside of the US) and then proceed all the way to L70 without missing a single level. Then there are 9 missing levels before CVP (L80). The reason for the large jump is to numerically represent how large the jump is in scope, responsibility and compensation between VP and CVP. From our perspective, there should be a similar gap between CVP and EVP as the jump is very challenging to make.
If you aren’t certain what level you are interviewing for, the best thing to do to clear up any confusion is ask your recruiter. Now that sounds trivial but a significant number of exec recruiters at Microsoft will try very hard to hide your level (e.g. L68 vs. L69) and only share your title (e.g. Partner). There are ways around it, but don’t be surprised if your recruiter claims they aren’t allowed to share it. You will need to confirm your level before you negotiate as each level has different pay bands and you can’t set up a proper negotiation without knowing your level.
Microsoft Director Salary
Each tech company structures executive pay quite differently, and therefore, your Microsoft salary negotiation might be different than you're used to. Some of the compensation components for Microsoft execs are the same as lower levels (e.g. Principal), but those components have much wider bands. Microsoft Partners will receive very large signing bonuses, generally starting at $350,000 for L68 partners. Partners also have very large annual bonuses at Microsoft. Compared to a Principal where the bonus caps out at 40%, Partners at Microsoft can make up to 90% of their base salary as a bonus each year. We would recommend taking the mid-point (45%) of the bonus band as your target, as achieving the maximum bonus at Microsoft is quite challenging. The signing bonuses at Microsoft for L68/L69 are significantly larger than top paying tech companies like Facebook, however, when you compare total compensation, Facebook’s compensation is noticeable higher than Microsoft’s.
As you get more senior at Microsoft, compensation structures start to change. For example, as a Microsoft executive you will be given Performance Stock Awards (PSAs) that include a relative total shareholder return (TSR) multiplier to try and tie executive pay and shareholder returns together. Generally speaking, as you enter the executive ranks at Microsoft, you will see as much as 70% of your pay in the form of equity awards and only 30% as cash. As a rough rule of thumb, if you have more cash in your initial offer than 30%, you are likely being underpaid and need multiple rounds of negotiations.
Every component of compensation at Microsoft is negotiable at the Partner, CVP and EVP level except for the annual bonus percentage, but these negotiations can become very complex. Microsoft’s executive recruiters are very well trained relative to normal recruiters, and we’ve consistently seen them come to compensation discussions with slide decks and pre-prepared presentations with pushback against alternate opportunities. To effectively negotiate executive compensation at Microsoft, you need to enter every conversation incredible well prepared with pre-crafted answers to targeted questions on everything from your negotiation leverage (e.g. competing offers) to your past projects. Even small mistakes like voluntarily revealing that you are considering offers in different locations will give your recruiter an opportunity to capitalize on the differences and significantly impact your compensation.
Can I Lose my Microsoft Offer by Negotiating?
This is far and away the number 1 question Rora’s career partners are asked. It is a very common and valid fear, especially in today’s volatile economy. But what’s the actual probability that, when negotiating with Microsoft, they would decide to pull the offer?
First, let’s discuss how it would benefit Microsoft to rescind the offer. The primary reason a hiring manager would elect to rescind an offer would be a fear of liability with their intended hire - i.e., this hire may cause a scandal, this hire will in no way be able to perform their duties, this hire will be detrimental to Microsoft, etc. Other than that, by the time an offer has been extended, Microsoft has already invested a substantial amount of time and money into the candidate they’re giving an offer to, and should have a concrete understanding of how this candidate will perform in the role. It would be a net loss for the company to go through all those interviews, conversations, and putting together the offer to then decide that they want to cut ties with the candidate – this is a risk they try mitigate before giving an offer.
Even in this economy, we have seen clients get increases in their offers from companies of all sizes by making respectful and well-reasoned requests. It’s very unlikely a company would pull the offer based on negotiation. Based on our data, we’ve only seen this happen less than 0.5% of the time - and that includes companies that are on hiring slowdown/freezes right now.
Now, there is a fundamental difference between getting an offer rescinded and losing the offer due to headcount. A headcount loss is solely based on the state of Microsoft and the necessity of the role within the team. This isn’t common but can occasionally happen if needs at the company shift – and is more common with earlier-stage startups. It does not reflect your interview performance or skill level, and oftentimes companies will try to keep in touch with you and share other opportunities once headcount opens up. If your offer was rescinded, the company would not have any interest in keeping you warm.
Regardless of the low likelihood of getting an offer rescinded, we know that this is a very common fear – and one that often holds candidates back from negotiating! To help mitigate the risk (and increase your confidence while negotiating) - follow these dos and don’ts to lower the probability of your offer getting rescinded:
- Do keep it professional - avoid getting into politics or making jokes that may be poorly received and make your hiring manager think you might be a liability to the company
- Do give justification and reasoning behind your ask for increased compensation – this could be based on your market value, another opportunity you have, specific expertise you bring to the table, or the strong relationship you’ve built with your hiring manager. Be prepared! We'd even recommend coming in with a negotiation script
- Do your first compensation ask over a phone call - in most cases we see a higher rate of success and understanding when the first ask is done over a call versus an email (though if you have to do so via email, here are a few tips)
- Do demonstrate to your hiring manager that you’re a solid candidate who would be a strong hire by creating and collaborating on an impact roadmap (outlining your 30 day, 60 day, and 90 day goals for getting started in your new role and your understanding of the priorities for this position)
- Do your best to understand the necessity of the role on this team - How critical is it? How long has the role been open for? This can help you determine the likelihood of the headcount being lost – and also the leverage you may have in negotiating
Microsoft-Specific Negotiation Advice
Here are some important pieces of information to keep in mind when negotiating your Microsoft compensation.
Unwilling to match competing offers
In many cases, Microsoft is simply unwilling to match higher competing offers. Recruiters know they will not get approval to match and will be upfront about this when you share competing offers. As a result, we recommend you still lead with you counter offer (to avoid leaving money on the table), but if you are getting clear pushback you can soften it by saying "if you can get close to my target number, that would meet my compensation expectations". Some specific orgs (e.g. Azure) are more willing to negotiate.
Approvals come from the decision maker
At Microsoft most compensation increase approvals go through the hiring manager or their manager. For significant increases the recruiter will need to secure VP approval. We recommend investing heavily in building a good relationship with your hiring manager. One way to do that is by setting up a call to discuss the team and how to succeed at Microsoft before accepting the offer. A strong relationship with your hiring manager will make a big impact on your ability to negotiate an increase.
The time pressure tactic
Since Microsoft is not able to match competing offers, they know their best tactic is to force candidates to drop out of their other interviews. They will often put aggressive timelines on your initial offer when they first share it. However, we have seen that in most situations it is possible to pushback successfully, as Microsoft is worried about getting too negative a reputation with engineers.
Microsoft doesn't push for offers in writing
Unlike companies like Google, Microsoft does not usually require you to provide cross offers in writing. This can be useful because many companies avoid putting their offers in writing, so you can't use them as leverage in other negotiations.
This is one area where Microsoft has a first class offering. For international applicants the package can be up to $18.5K. The best part is you can take it as cash and they will gross up the total value to cover taxes. Recruiters aren't always proactive about disclosing this so make sure to ask.