Although people do many jobs at Microsoft’s sprawling campus in Redmond, Wash., there are fundamentally two types of workers.
The first type is an employee, entitled to the generous pay and benefits Microsoft has long offered: paid parental leave, a 401(k) match, tuition assistance, discounted stock purchases, the list goes on.
The second is a contractor, employed by one of Microsoft's 2,000 suppliers. Many of them do tasks similar to those of the employees -- and pass by them on the winding walkways -- but often receive none of the perks that come with that staff badge.
The difference is part of an increasingly obvious divide between the haves and have-nots in the tech sector. Now Microsoft is taking one small step toward narrowing that gap: requiring all its vendors with more than 50 workers to offer those detailed to Microsoft contracts no fewer than 15 days of paid leave.
According to the Bureau of Labor Statistics, that’s the average number of days that entry-level private-sector employees receive — Microsoft employees start at 15 days of paid vacation, and 80 hours of sick leave. But it can be a rarity for those on contracts, since the United States doesn’t require employers to offer any paid leave, and only about half of employees have access to it. In a blog post announcing the move, Microsoft said it recognizes that the mandate will require paying more for the contracts it signs, and pledged to work with suppliers to figure out exactly how much.
This doesn't come in a vacuum: The White House has been pushing on paid leave for months. On Wednesday, it announced that administration officials will be touring the country next week and encouraging states to pass laws requiring employers to offer paid time off.
But Microsoft says it started thinking about the move last fall, no pressure required -- for two reasons.
First, the economics. “The research shows that employees who get this kind of benefits are not just happier personally, but more productive,” Microsoft general counsel Brad Smith said in an interview. Multiple studies from states and other countries that have instituted paid leave policies have shown that they can reduce turnover, improve performance and even raise stock prices.
And second, the more nebulous social implications: Microsoft’s new chief executive, Satya Nadella, has been putting his stamp on many things, not just hololenses. "We thought about how this fits into the broader discussion around income inequality in the country,” Smith says. “I think this step reflects a recognition that we want people who do substantial work for Microsoft to enjoy good benefits, even if they don’t work for Microsoft."
That’s an unusual mentality in the fissured workplace, where companies contract work out in large part to avoid having to care about so many employees. Requiring suppliers to offer any level of benefits appears to be at least a rare step for a company of this size, and perhaps an unprecedented one. Vicki Shabo, who oversees workplace programs at the National Partnership for Women and Families, says she has never heard of such a large company doing something like this, and applauded the move.
“This is one way of changing culture, and changing business practices, and ultimately changing public policy,” Shabo said.
The public policy front is already changing, and Microsoft’s move may be a recognition of the fact that suppliers could be required to offer more paid leave at some point in the future anyway. Although federal legislation requiring paid leave hasn’t gotten far -- and the White House hasn’t mandated that federal contractors offer it -- many states are moving forward on their own. Washington state, where many of Microsoft’s contractors are based, is debating a bill that would establish minimum standards for sick leave.
But this isn’t the first time Microsoft has asked vendors to treat employees better. It has long faced issues with temp workers: The company first got dinged for misclassifying employees as independent contractors in 1990, and in 2000, the company paid out a $97 million court settlement to “permatemps” who argued that they were entitled to some of the same retirement benefits and stock privileges. After that, it started requiring its temp staffing agencies to pay health-care benefits and give workers 13 paid days off per year.
More recently, the inequality between employees and contractors made headlines when a group of workers at a Massachusetts contractor called Lionbridge formed a union — the first of Microsoft’s contractors to do so. After that, a spokesman told the Seattle Times in January, the company started "considering possible changes to our policies” that could improve working conditions at suppliers.
“We gave a lot of thought to the basic question around people who’d be working close to other people,” Smith said. "And fundamentally what we recognized is that people play different roles, but the people who are doing work for our suppliers are doing work that we care about.”
According to Microsoft, this policy will be much broader than the one that began covering temp staffing agencies in the 1990s, applying to all companies that provide services — from groundskeepers to ad agencies. And it’s probably most useful for low-wage workers such as security guards and janitors, who receive dramatically less paid leave than higher-income earners. (Microsoft says it doesn't know how many of its vendors already offer paid leave, or how many have more than 50 employees, or where they're all based.)
Microsoft might be the first large tech company to require its suppliers to offer paid leave, but the movement to improve conditions for contracted service workers has been percolating in Silicon Valley as well. The people who drive shuttles for Facebook and Google workers just unionized with the Teamsters, for example, and Apple recently announced it would simply make all of its security guards employees, giving them the same benefits package as the people who design iPhones.
Microsoft says it probably wouldn’t try Apple’s approach of bringing more contractors in house, because it believes in focusing on “core competencies.” Smith also didn’t say this would be the beginning of a parade of new benefits requirements.
Contractors would like to see parity on different forms of compensation, said Les French, the director of a chapter of the Communications Workers of America that has tried to organize Microsoft contractors over the years. The most common thing people want, he said, is job security. More extended time off for the birth of a child is another benefit cited by advocates as having beneficial effects for workers and society overall.
French thinks three weeks of paid leave, however, is a good place to start.
“What I hear almost daily is that a large number of Microsoft vendors do not offer these benefits or that they offer substantially less,” French wrote in an e-mail. "This is definitely a welcome move in the right direction."