ASML ties executive pay to morale after engagement falls

By Daniel Okafor

ASML will tie senior leaders’ long-term incentives to employee experience after its engagement index fell to 73.5% in 2026 from 78% in 2025.

In a staff memo first reported by Business Insider, CEO Christophe Fouquet said the Dutch chip-equipment maker would add a Workplace Experience Index to the long-term incentive plan for senior leaders. The plan includes Fouquet and the rest of ASML’s Board of Management. “In the coming years, it will directly influence the remuneration of senior leaders, including the Board of Management,” Fouquet wrote.

ASML’s annual employee survey drew more than 38,000 of roughly 44,000 employees. Fouquet acknowledged that the decline followed what he described as a disruptive and emotional year.

The six-question index draws on employee experience. The memo identifies these themes:

• Trust that senior leadership will make the right decisions.
• Confidence that employees can speak up safely.
• Understanding of employees’ roles.
• Belief that teams operate effectively.
• A sense that direct managers care.

ASML has not disclosed how much weight the index will carry or when it will first affect pay. Business Insider reported that IBM and Aviva have previously included employee engagement in executive pay targets.

Why did ASML cut jobs despite record profit?

Fortune described ASML as the world’s only supplier of extreme ultraviolet lithography machines, which are essential for producing the most advanced semiconductors. The AI boom has drawn hundreds of billions of dollars from tech giants into infrastructure spending that benefits ASML, Fortune reported. ASML reported a record net profit of €9.6 billion in 2025.

On the same day it reported those results in January 2026, ASML announced plans to cut about 1,700 positions. The cuts represented roughly 3.8% of the workforce and focused on management roles in its technology and IT organizations in the Netherlands and the U.S. ASML said the restructuring would remove bureaucracy and let engineers concentrate on innovation.

Dutch unions pushed back, according to NL Times. CNV said the proposal left it completely taken aback. ASML then negotiated a social plan with FNV, CNV, De Unie and VHP2. The unions agreed in principle in May and finalized the agreement in June. It bars compulsory layoffs until May 1, 2027, and relies on internal redeployment that ASML said could save several hundred jobs.

Fouquet linked the engagement decline to that upheaval. He cited the restructuring turmoil as the reason for tying leadership pay to employees’ experience of the company.

Why is retention more urgent?

Fortune described a broader technology trend toward long hours and repeated layoffs. Some startups have adopted the “996” schedule borrowed from China’s tech industry, requiring work from 9 a.m. to 9 p.m., six days a week.

Challenger, Gray & Christmas counted about 1.2 million announced U.S. job cuts in 2025, the most since 2020 and roughly equal to 2008. Technology led the private sector with 154,445 announced cuts.

Through September 2026, total announced U.S. cuts had fallen 39% to 573,195. Technology cuts moved the other way, rising 54% to 165,925 and accounting for 29% of all cuts, according to Challenger’s September report.

Job cuts continued in October 2026. Netflix said it would lay off roughly 1,000 employees, or 6% of its workforce. Microsoft offered voluntary buyouts to about 60,000 employees, roughly one-quarter of its staff. Skydance, formed by Paramount’s takeover of Warner Bros. Discovery, warned employees that layoffs were coming.

ASML faces a different retention equation because its workforce is highly specialized, according to Martijn Hendriks, deputy scientific director of the Erasmus Happiness Economics Research Organization. He said ASML spends heavily on employee well-being because replacing trained specialists costs so much. That makes the workplace index a labor-retention mechanism, not merely a sentiment measure.

Does executive pay affect morale?

The change comes as soaring executive pay fuels questions about fairness, Fortune reported. The 1,500 highest-paid CEOs worldwide received an average real-terms raise of 11% in 2025, while the average worker received 0.5%, according to a study by the International Trade Union Confederation and Oxfam. Fortune also reported that those CEOs averaged $8.4 million, up from an inflation-adjusted $5.5 million in 2019.

Forbes declared Elon Musk the world’s first trillionaire in June 2026 after SpaceX’s record IPO. Fortune reported that his fortune has hovered around that mark since. According to Fortune, Tesla shareholders approved a pay package in November 2025 that could award him up to $1 trillion in stock if he meets performance targets.

The AFL-CIO valued Musk’s 2025 Tesla compensation at $158.3 billion, about 2.5 million times the $57,243 earned by Tesla’s median employee. Hendriks said employee engagement and CEO compensation have no general direct link. He said engagement can fall sharply when media coverage spotlights extreme pay packages.

University of Oklahoma organizational-behavior professor Trevor Watkins said: “the predicted outcome is going to be anger and resentment.”

He added: “These emotions do not bode well for what organizations care about with respect to their workforce. They want them to be engaged and productive, and these perceptions of unfairness and resentment interfere with that.”

ASML’s next annual survey will provide the first broad test of the new mechanism: whether leadership incentives lift engagement above 73.5% while protecting the specialist teams behind its exclusive EUV position. The memo’s missing pay weight and start date leave the pace and force of that test uncertain.