Microsoft Drops Return of Overpayments Demand

Microsoft Monday backed off its requests that recently laid-off workers who received too much cash in their severance packages return the money.

However, by waiting two days since the story broke before reversing itself, Microsoft’s seemingly miserly behavior may have cost itself more through bad publicity than could be offset by the relatively minor financial loss.

“The P.R. issue over the past two days has cost Microsoft a thousand times more than the value of the payment error,” one former Microsoft (NASDAQ: MSFT) employee – not one laid off – told InternetNews.com in an e-mail.

Microsoft had recently laid the workers off as part of the first phase of cuts it announced last month.

Once it discovered the overpayment error, the software giant sent letters to the former workers asking them to return the overpayments.

Technology site TechCrunch.com broke the news on Saturday that Microsoft had sent letters asking for the return of the money.

Perhaps ironically, the overpayments went to relatively few of the laid-off workers. However, by the time that Microsoft responded by dropping the repayment requests, the story had ballooned in importance – a hard lesson for some Microsoft officials to learn.

“Last week, 25 former Microsoft employees were informed that they were overpaid as a part of their severance payments from the company. This was a mistake on our part,” a Microsoft spokesperson said in an e-mail to InternetNews.com.

“We should have handled this situation in a more thoughtful manner. We are reaching out to those impacted to relay that we will not seek any payment from those individuals,” the spokesperson added.

That means that only 25 out of 1,400 employees who were let go in the first round of what will eventually be 5,000 cuts over the next year and a half received the overpayments and letters.

Citing another Microsoft spokesperson earlier today, CNET’s Ina Fried reported on her blog that the average overpayments ranged between $4,000 and $5000. She also reported that Microsoft had rescinded the repayment requests.

Microsoft announced the first major layoffs in its 33 year history in January when it released disappointing earnings for the holiday sales quarter.