Microsoft slashes contract worker rates by 10 pct

Microsoft Corp. is slashing overtime, hours and pay for U.S. temporary workers as part of an overall push to curb expenses during the recession. Microsoft will cut what it pays the staffing agencies by 10 percent for current projects and won't raise the rate it pays for temporary workers who return after a mandatory annual 100-day break. The company also plans to reduce overtime and the total number of hours clocked by temporary workers.

Microsoft does not disclose how many contract workers it uses, and analyst estimates vary. Sid Parakh, an analyst for McAdams Wright Ragen, said he believes the number is somewhere between 40,000 and 60,000 worldwide. The company employs an additional 95,000 permanent workers globally.

In a statement Thursday, the company said it talked with some employment agencies before making the decision. Online advertising spending is also on the wane. Microsoft's online search and ad business was already losing money despite heavy spending to beef up the underlying technology. Chief Executive Officer Steve Ballmer said this week that the company would continue to pour money into competing with Google Inc. on this front.

The company relies on skilled contract workers for all sorts of jobs, from developing and testing software to designing Web sites to writing technical documentation. And it's not alone. Tech companies including IBM Corp. and Advanced Micro Devices Inc. routinely hire temporary workers; Google had 10,000 contractors as recently as October.

In the United States, a 2006 General Accountability Office report indicated that about 21.5 million U.S. workers find jobs through temp agencies, work as independent contractors or are self-employed. Inside Microsoft, the fine distinction between permanent and temporary workers was contentious enough to prompt a class-action lawsuit in 1992, in which contract workers argued they were treated exactly like permanent workers but offered fewer benefits. Microsoft settled in 2001 and began paying $72 million to nearly 8,600 former contract workers in 2005.