Microsoft will cut what it pays the staffing agencies by 10 percent for current projects and wont raise the rate it pays for temporary workers who return after a mandatory annual 100-day break. The company also plans to reduce overtime and the total number of hours clocked by temporary workers.

In a statement Thursday, the company said it talked with some employment agencies before making the decision.

The move, first reported Wednesday by the Seattle Post-Intelligencer, comes a month after the software maker resorted to its first mass layoffs and said it would trim travel costs, freeze wages and scale back expansion plans for its Redmond, Wash., headquarters.

As the recession has deepened, consumers and businesses have reined in spending on new computers and software. Because Microsoft sells the operating system that runs on the vast majority of computers around the world, it is feeling the pinch, particularly in its lucrative Windows and Office desktop software businesses.

Online advertising spending is also on the wane. Microsofts online search and ad business was already losing money despite heavy spending to beef up the underlying technology. Chief Executive Officer Steve Ballmer said this week that the company would continue to pour money into competing with Google Inc. on this front.

Microsoft does not disclose how many contract workers it uses, and analyst estimates vary. Sid Parakh, an analyst for McAdams Wright Ragen, said he believes the number is somewhere between 40,000 and 60,000 worldwide. The company employs an additional 95,000 permanent workers globally.

The company relies on skilled contract workers for all sorts of jobs, from developing and testing software to designing Web sites to writing technical documentation. And its not alone. Tech companies including IBM Corp. and Advanced Micro Devices Inc. routinely hire temporary workers; Google had 10,000 contractors as recently as October.

In the United States, a 2006 General Accountability Office report indicated that about 21.5 million U.S. workers find jobs through temp agencies, work as independent contractors or are self-employed.

Inside Microsoft, the fine distinction between permanent and temporary workers was contentious enough to prompt a class-action lawsuit in 1992, in which contract workers argued they were treated exactly like permanent workers but offered fewer benefits. Microsoft settled in 2001 and began paying $72 million to nearly 8,600 former contract workers in 2005.

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