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Microsoft (Research) employees are growing more and more disillusioned with stagnating salaries and an increasingly contentious review system that they say is unfair, according to a recent report in WashTech News. That's led to more defections by senior engineers and growing dissatisfaction among rank-and-file workers, the report said.

The publication is affiliated with the Washington Alliance of Technology Workers, a labor union affiliated with the AFL-CIO that has tried to organize Microsoft workers in the past. At issue is the company's performance review system, according to the report. Microsoft employs some 38,000 workers in the U.S. alone.

Some workers have complained that the review process has become tainted, rewarding workers based on office politics rather than performance.

But the problems at Microsoft underscore a larger labor issue facing companies once famous for spawning millionaires via lucrative stock options. These companies now have to find ways to keep top talent from defecting to younger competitors, such as Google (Research).

It's also become a morale issue, experts say, since it has led to a kind of internal caste system at some companies, like Microsoft, where employees who joined before August 1997 -- which is about when the company stopped doling out options -- are referred to as "in the money."

"For young companies getting up and going, there's so much work to be done that politics takes a back seat to the job at hand," said Roger Kay, founder of Endpoint Technologies Associates, an independent research firm.

Kay noted that at startups, even rank-and-file workers typically get stock or options or a combination of the two, so they can make serious money if a company takes off. That opportunity dries up when a company matures and its stock price stops rising, which he said was true of Microsoft.

"They have a huge cash flow that finances a whole city of people, and yet where you can grow from there is actually fairly limited," Kay said. "Microsoft's stock price isn't going anywhere, and in that environment, politics that were background noise rise to the foreground."