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How to Negotiate with Microsoft


Congratulations! You've secured a Microsoft job offer or are anticipating one. Transitioning from being an interviewee to an offer recipient may feel like your work here is done — but really, now’s the time to focus, research, and really flex your muscles via thoughtful negotiation. Doing so can result in a significant increase to your income and/or improvement to your overall compensation package, which will impact your finances — and, thus, your life — for years and decades to come. Put simply: It pays off to do this next part right.


The first step to a solid Microsoft negotiation strategy is to do your homework and wrap your head around industry, company, and title standards. You also want to go into the negotiation phase with a deep understanding of what your offer will entail, what it all means, how it will impact your compensation both now and later. It also helps to know which elements of a compensation package are fair game for negotiating, and which are not. 


Here I’ll help you understand your Microsoft compensation package, avoid the most common negotiation mistakes, and negotiate as effectively as possible with Microsoft. If you find yourself in need of additional, tailored advice to navigate the process and secure the highest possible outcome after reading, schedule a 1:1 consultation — I’m here to help.


In the following article, we will cover:

  1. Understanding the Compensation Components of a Microsoft Offer

  2. 4 Mistakes to Avoid During Your Negotiation with Microsoft

  3. Tips for Negotiating with Microsoft


 


UNDERSTANDING THE COMPENSATION COMPONENTS OF A MICROSOFT OFFER


Let’s explore the most common components of a Microsoft offer:

  1. Base Salary 

  2. Annual Cash Bonus 

  3. New Hire Equity Award 

  4. Annual Stock Award 

  5. Signing Bonus 


Overall, Microsoft tends to negotiate less than other large technology companies (e.g. Meta, Amazon), but improvements can be made with the right research, plan, and delivery. Before jumping into the details, here’s a quick overview of Microsoft offer components as well as their typical negotiability and impact. 


Offer Components 

Negotiability 

Impact 

Base Salary

Low 

High - Impacts 401K, bonus calculation, and future raises 

Target Performance Bonus

Typically non-negotiable, calculated as a percentage of base salary. 

Non-negotiable

New Hire Equity Award

High

High - Multi-year impact with upside from equity appreciation. 

Annual Stock Award

Typically non-negotiable, ask for a historical average for meeting expectations.

Non-negotiable

Signing Bonus

High 

Medium - Provides 1-2 year salary boost but non-recurring.


For example, here's a recent Microsoft offer for a Level 62 Data Analyst:



Year 1

Year 2

Year 3

Year 4

Base Salary

$147,000

$147,000

$147,000

$147,000

Signing Bonus

$25,000

$0

$0

$0

Microsoft RSUs*

$20,000

$20,000

$20,000

$20,000

Target Performance Bonus

10%

10%

10%

10%

Stock Refreshers

N/A

N/A

N/A

N/A

Total Compensation

$192,000

$167,000

$167,000

$167,000


*RSUs means Restricted Stock Units — this is the New Hire Equity Award.  


A detailed look at the Microsoft compensation components:


1. Base salary

Microsoft offers a competitive, but not overly aggressive, base salary, which will account for 70-90% of your total Microsoft compensation, depending upon your role, level, and position type. 


Key Base Salary Considerations: 

  • Microsoft’s base salary tends to be a relatively sticky negotiation component because of its long-term nature and the high degree of certainty (unlike a future stock grant).

  • Even so, it’s worth the effort to negotiate as it impacts your annual raise, 401K match, and annual cash bonus since all three are calculated as a percentage of your base salary.

2. Annual Cash Bonus

Microsoft compensation includes a Target Performance Bonus, which is based upon performance. 


Key Annual Cash Bonus Considerations: 

  • This is a non-negotiable component that is linked to base salary.

  • Microsoft recruiters may reference or allude to the max annual cash bonus, often phrased as “eligible up to.”

  • It’s important to understand the expected % bonus for the group and role you’d have in order to properly account for this. (Hey, you’re great, but don’t bank on hitting the highest amount as your basecase.)


3. New Hire Equity Grant


  • What does “new hire equity grant” mean? Simply put, Microsoft awards a predefined amount of stock awarded over a number of years. The purpose of the grant is to align employee compensation with company performance (inferred through stock appreciation), and to encourage employee retention since it’s awarded over time.   

  • How Microsoft structures its on-hire stock awards: Microsoft offers on-hire equity grants in the form of Restricted Stock Units (RSUs). An RSU is a promise to receive a certain number of shares in the future.

  • How Microsoft calculates the number of shares: Microsoft’s RSU will be offered as a dollar amount, which is then converted into a share equivalency based upon the closing price of Microsoft stock on a specific day in the future.  The specific offer wording will look like this: “The number of shares will be calculated by dividing $50,000 USD by the closing Microsoft stock price on a future date (typically the 15th of the month) immediately following the month in which your start date occurred.”

  • How Microsoft on-hire stock awards vest: Microsoft typically follows a 4-year vesting schedule at a rate of 25% per year for your New Hire Equity Grant. You can expect the first vest (meaning, when you obtain ownership of the stock) to fall on your first anniversary and the remaining 75% of the on-hire stock awards to vest annually thereafter. Additional stock awards are provided annually on a discretionary basis. 

  • How should you view Microsoft RSUs? RSU compensation is not a guarantee and the value of RSUs can increase/decrease with time, so it’s best not to count upon your RSU compensation amount as guaranteed. 


Despite the possibility of value decline, RSUs are one of the most powerful ways to realize outsized compensation growth and long-term wealth generation.


4. Annual Stock Award


In addition to your larger up-front new hire equity grant, Microsoft offers smaller annual stock awards to create further compensation upside and long-term retention benefits for Microsoft. These are typically non-negotiable, however, you can, and should, ask to see a historical average to know that what you’re being offered meets expectations.  


The vesting schedule for annual stock awards differs from the new hire equity grant’s schedule. Microsoft’s annual stock awards vest over 5 years (20% per year) and vest quarterly (5% per quarter). 


Here’s an example of what Microsoft’s annual stock award compensation could look like over a 4-year working period:



Grant Amount 

Vesting Schedule 

End of Year 1

End of Year 2 

End of Year 3

End of Year 4 

Initial New Hire Grant - Year 0

$80,000

4 Years / 25%

20,000


$20,000

$20,000


$20,000


Annual Stock Award - Year 1 

$30,000

5 Years / 20%


$6,000


$6,000

$6,000


Annual Stock Award - Year 2

$30,000

5 Years / 20%



$6,000


$6,000


Annual Stock Award - Year 3

$30,000

5 Years / 20%




$6,000

Total Stock Value

$170,000

Blend 

$20,000

$26,000

$32,000

$38,000


5. Signing Bonus


Microsoft will typically offer a signing bonus to new hires. Given their one-time nature, Microsoft tends to be more willing to negotiate signing bonuses, and we’ve managed to help our clients make significant improvements to their signing bonus amounts.


Signing Bonus Timing: For larger signing bonuses ($50,000+), Microsoft will often opt to split the signing bonus into two equal parts over two-years.


 

4 MISTAKES TO AVOID WHEN NEGOTIATING WITH MICROSOFT:

 

1. Not negotiating

The most common — and largest — mistake is opting not to negotiate with Microsoft in the first place. The most frequent reasons (and my rebuttals) for choosing not to negotiate are: 


Reason for not negotiating

Rebuttal

Concern that they’ll pull the offer.

Extremely improbable if you negotiate in a professional manner. 


Have never seen this occur first hand.

Already better than what you currently make/higher than you expected.

Unlikely that Microsoft has led with its best and final offer.   

I don’t feel comfortable negotiating and it makes me extremely nervous.

With the right information and support you can absolutely do this. If this is how you’re feeling, schedule a consultation today — I can help. 

  

2, Offering your compensation guidance/wants first


Negotiations can, and often do, start with the first discussion. Depending on your unique situation, we suggest two approaches:


SITUATION A - You’ve applied to the role and are job seeking.


Instead of stating a number, you can say: 

  • “I’d like to better understand the role and responsibilities before putting out compensation amounts.” 

  • “Can you share the budgeted compensation range for the position?”

  • “I’d expect that it would be competitive for the market, but I will need to do some more research and understand the role better before I can give you an accurate number.”

  • “There are a lot of elements to consider like PTO, 401K, benefits, etc., so just a single number probably isn’t a feasible answer.”


SITUATION B - You’re happily employed, being recruited, and too busy to waste time pursuing something that isn’t financially viable.


In this case, it can be rational to provide a number (if they refuse to do so) and thus not waste your time. MAJOR CAVEAT: You should be very aware of what the market rate looks like for your position and targeting at least the 75th percentile. 


3. Not understanding your offer components and total compensation


Compensation packages can become quite complex when expanded to include things like equity, relocation, signing bonuses, long-term incentives, titles, severance packages, PTO, etc. Understanding how these elements interact and negotiating value-creating tradeoffs can be difficult. 


Before responding to any offer, do the following: 

  • Take time to understand all of the offer components.

  • Understand the fair market rate for your position type and how the offer compares to it. 


4. Negotiating on the fly


Recruiters and hiring managers tend to have the upper negotiating hand because:

  1. They know what their limitations/options are.

  2. They negotiate offers regularly.

  3. They have less emotional attachment to the outcome. You’re debating a major life decision with shades of gray. It’s much more likely that your job offer is just one of many others they need to make and thus is treated more objectively. 


Given the above, it’s helpful to reduce some of this inherent disadvantage by not negotiating on the fly. For your Microsoft contract negotiation, the best outcomes will come about by doing the following: 


Action 

Why this helps

Do not immediately accept or negotiate an offer upon its receipt. 

Allows you to closely evaluate the offer components and more objectively evaluate what areas to negotiate. 

Personally list out your targets, asks, and priorities.  

Predefining your targets and asks leads to better outcomes since objectivity and clarity is often greater prior to an offer. 

Have a plan. 

Having a plan — even if it has areas of uncertainty — helps keep you calm and on course when negotiations begin. 

If possible, negotiate via email. 

Negotiating lets you carefully craft a reply, and makes it easier to reference the progression of the negotiation. 


 

TIPS FOR SUCCESSFULLY NEGOTIATING WITH MICROSOFT


1. Know your communication preferences

If the thought of a verbal negotiation is a non-starter, it’s ok (and in some ways, better) to negotiate over email. It’s likely that you’ll need to have some verbal discussions with your recruiter, but I suggest that after you’ve received the first offer to respond with something to the effect of: 


“Can I review this offer and provide you with my thoughts over email?” – 10/10 times the recruiter will say yes, and this sets the precedent for how you’ll engage going forward.


2. View “no” and discomfort as part of the expected response


In order to reach your highest offer potential, you’ll need to accept that hearing “no” will be part of the plan. If we optimize our approach for never getting rejected, we’ll almost certainly ask for too little. 


3. Get a second opinion on your written communication or practice your verbal negotiation


It takes a village! Great negotiations tend to have a sounding board or partner to help you refine your communication, stick to your plan, and achieve your highest outcome. That could be a friend, family member, or colleague, or negotiations coach like myself.



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