Microsoft on extra severance: Never mind

updated 7:02 p.m. ET Feb. 23, 2009

SEATTLE - A few weeks after launching the first wide-scale layoffs in its history, Microsoft Corp. admits it screwed up a key part of the plan.

First Microsoft realized that an administrative glitch caused it to pay more severance than intended to some laid-off employees. The company's response: It asked the ex-workers for the money back.

But when one of Microsoft's letters seeking repayment surfaced on the Web on Saturday, the situation turned embarrassing. On Monday, the company reversed course and said the laid-off workers could keep the extra payouts.

Lisa Brummel, Microsoft's senior vice president for human resources, said the letters were mailed to 25 of the 1,400 people let go in January. Most of the checks were off by about $4,000 to $5,000, she said.

Brummel said she learned of the letters over the weekend after one appeared on the technology blog TechCrunch.

"I decided it didn't quite feel right," she said in an interview.

The executive called most of the 25 laid-off employees Monday to personally tell them Microsoft would not seek repayment after all.

(Msnbc.com is a joint venture of Microsoft and NBC Universal.)

Redmond, Washington-based Microsoft also gave about 20 employees too little severance. When the company noticed its mistake, it sent checks and explanations to those people, she said.

Brummel called the glitch a clerical error, and said that at some point in the process of calculating severance packages, communicating with employees and cutting checks, "we had payments misaligned with people's names." (Brummel said she didn't know whether an Excel spreadsheet was at the root of the problem.)

With the recession biting into sales of Microsoft's core Office and Windows software, the company said in January it would let up to 5,000 of its 94,000 employees go, the only mass layoff in its 34-year history. Microsoft remains profitable, however, and has a cash hoard of nearly $21 billion.

Shares of Microsoft sank 79 cents, or 4.4 percent, to close at $17.21.

Also in msnbc.com business Your Career: Married to the job, and each other Answer Desk: Qualifying for more jobless benefits Venza sorta-crossover is Toyota’s latest mistake ConsumerMan: Chinese drywall remains a big threat   Video: This beer would cost you at least $8,000

MORE FROM U.S. BUSINESS

U.S. business Section Front

What a steal! Madoff’s homes get price cut Applied Materials to cut 1,300 to 1,500 jobs   Hewlett-Packard to purchase 3Com Corp. Frustrated AIG CEO tells employees he’ll stay JPMorgan Chase adding 1,200 mortgage officers Bear Stearns execs acquitted of subprime fraud Madoff associate wills fortune to charity Adobe to cut about 680 full-time jobs European ruling may endanger Sun-Oracle deal FedEx projects busier holiday peak U.S. business Section Front   Add U.S. business headlines to your news reader: