The decision was a quick turn-about for the company, which last week sent letters to some of the 1,400 employees who were laid off in late January, asking them to return some of their severance because of an “administrative error.”
The demand received wide coverage after TechCrunch posted a copy of one such letter over the weekend.
“In the normal course of business, we may underpay or overpay in a bonus situation,” said Lisa Brummel, the senior vice president of human resources for Microsoft. “If we overpay, we ask that the money be returned. Severance is not unlike that.
“But this is a unique time and our normal practice didn’t make sense,” she said.
Of the 25 people who were overpaid, Brummel said she had reached 17 by telephone as of mid-afternoon, and left messages for the others, telling them that they could keep the money.
“This first came to my attention two days ago,” she said, “and I immediately told my staff to stop following through. Since then, I have called each one, to let them know they do not need to repay the money, and apologized to them.”
Most of the overpayments were in the US$4,000 to $5,000 range, Brummel said, though “there were a couple who were over that.” By her figures, Microsoft overpaid between $100,000 and $125,000.
An additional 20 former employees were initially underpaid, but have since been paid what they were owed.
She said the people she had talked with were “very pleased that the company did the right thing. They were quite impressed that I picked up the phone and called them personally.”
Earlier today, a Seattle employment lawyer questioned whether Microsoft could make its payback demand stick. Calling the law unclear, attorney D. Jill Pugh said she would advise anyone who received such a letter to call on a lawyer to negotiate with the company.
Later in the day, Brummel dismissed the idea that Microsoft’s decision was based on any legal second thoughts. “I wasn’t deeply involved in the legal [discussions], but we rarely do anything without thinking of the legal implications,” Brummel said. “I think that any company has the right to retrieve any overpayment.”
For the future, Microsoft has put a process in place to notify her sooner of such overpayment requests. “We’ll be double-checking our accounting, too,” she said.
Microsoft laid off approximately 1,400 employees worldwide on Jan. 22, part of a $600 million cost-cutting move this quarter and the first wave of a planned 5,000-worker reduction during 2009. According to reports, the company offered severance packages that equaled a minimum of 60 days salary.