Yahoo suspends employee pay raises

Under financial pressure even before the recession, Yahoo has suspended pay increases for its employees.

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Update at 8:13 a.m. PST: Yahoo comment added.

Freezing salary increases is one of the standard tools available to cut costs during hard times, and Yahoo has taken it.

The Sunnyvale, Calif.-based company, whose years-long effort to improve its financial fortunes now must factor in a serious recession, told CNBC it's freezing raises, with employees notified on Wednesday.

Yahoo confirmed the change with CNET News on Friday and said it's part of the company's response to the recession. Yahoo also laid off 1,520 employees, beginning in December.

"There will be no regular salary increases this year," Yahoo spokeswoman Kim Rubey said. "We believe our employees understand the value of the cost-reduction initiatives we have been implementing, and the need to keep Yahoo fiscally sound through the current economic downturn."

New Yahoo CEO Carol Bartz fared better than the rank and file, with a $19 million pay package, not including bonuses.

Meanwhile, Google is under much less pressure but also grappling with the economy. On Thursday, Google announced a stock-option exchange program that will cost the company about $460 million but allow it to replace stock options made worthless by the company's stock drop with new ones based on current stock prices.