In an effort to reduce costs, Microsoft is cutting current contractor pay by 10 per cent and future contractor pay by 15 per cent.

"We held discussions with some of the impacted agencies and settled on the 10 percent reduction based on the economic climate and the need to achieve greater cost reductions," Microsoft said in a statement.

According to a letter reportedly sent to contract agencies that was posted on the TechFlash blog, Microsoft also plans to cut future contract pay 15 per cent.

Microsoft did not reply to a query asking to confirm the legitimacy of the letter.

The contractor pay cuts follow Microsoft's announcement in late January that it plans to cut 5,000 employees.

Microsoft employs nearly 96,000 people directly. It does not disclose how many contractors work at the company, although estimates are in the tens of thousands.

In a conference call with analysts and reporters earlier this week, Microsoft CEO Steve Ballmer said he'll continue to look for ways that the company can reduce costs. He also emphasized the importance of continued investment during the global recession.

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