Microsoft Corp plans to broadly raise salaries and stock awards to attract and retain top talent, Chief Executive Steve Ballmer said in an internal memo obtained by Reuters on Thursday.

Microsoft, which like Silicon Valley companies Google and Yahoo risks losing top employees to hot upstarts like Facebook, must improve the way it rewards and support its most talented staff, Ballmer said.

Through our history, we have been THE place people came when they wanted to make a difference in the world through software, hardware and services, the chief executive said in a memo sent to all employees on Thursday morning.

This is as true today as it has been at any time in our history, and the changes we're rolling out today will help ensure Microsoft continues to be the place that top talent comes to change the world.

The action follows Google's 10 percent increases this year. Microsoft plans, among other things, important compensation increases for divisions with fast-moving markets, including research and development and certain geographies.

All employees will have a portion of their stock awards shifted into base salary, according to the memo. Microsoft's shares are at the same level as 10 years ago.

The company will tie bonuses and stock awards closer to performance, with the review process also undergoing changes, Ballmer said.

Microsoft suspended merit-based pay raises for all employees two years ago, when it laid off 5,000 workers, or about 5 percent of staff, to cut costs. It brought back what it calls modest merit raises in 2010.

Last year it told employees they would have to contribute to health insurance for the first time, beginning in the next couple of years.

The changes will occur around September, according to the memo. Microsoft's shares closed down 0.9 percent at $25.52.

(Writing by Edwin Chan; Editing by Steve Orlofsky)

(Reporting by Bill Rigby)

Steve Ballmer Microsoft