Phil Palios, holding sign, gathers with other Microsoft contract workers Monday evening.

REDMOND -- The two dozen contract workers who gathered on the sidewalk outside Microsoft's main entrance this evening were certain of at least a couple things: First, they don't think their pay should be cut.

Second, they need some bigger signs.

Beyond that, things are less clear: Should they establish an informal alliance or join a full-fledged union? What about pursuing a class-action lawsuit? And the most pressing issue: Should they agree to a revision in their contracts, accepting pay cuts, to keep their jobs in the short run?

"I'm not signing it," said Phil Palios, who organized the protest, challenging the legality of changing their contracts. He held a small sign that read "NO PAY CUTS!" as he addressed his fellow contract workers. "But my point is we need to get together as contract employees, and we need to form an alliance and prevent this from happening in the future."

Volt Workforce Solutions, believed to be the largest provider of Microsoft temporary workers, told them Friday evening that they need to accept a 10 percent reduction in pay by the end of Tuesday to ensure continued employment.

Asked by Palios for a show of hands, about half the people in the crowd Monday evening indicated that they planned to accept the pay cut. Several, with families, said they couldn't afford to be unemployed.

But others said they plan to take a stand, refuse to sign, and see what happens.

"I don't see why I should sign a legally binding contract to screw myself," explained Rick Collins, a software tester. "I've already got a contract that works for me, and they're asking me to do something else. Once I've done that, I've given up my right, because I have conceded to their terms and said I'm OK with it. And I'm not OK with it. So why should I?"

Microsoft recently told employment agencies that it's cutting by 10 percent the amount it pays them for contract workers on existing temporary assignments. In addition, it's reducing the target billing rate by 15 percent for future assignments.

The employment firms have the option of taking the hit themselves, but the profit margins in their business are slim already, so many are sharing all or most of the impact with their workers in the form of lower pay.

The changes are part of a series of cutbacks at the Redmond company, in response to the deteriorating economy. The cuts are affecting not just contract workers but also direct employees. Microsoft announced in January that it was laying off up to 5,000 employees over the next 18 months and eliminating merit pay increases for the upcoming fiscal year.

Microsoft declined to comment on the protest Monday evening.

The contract workers acknowledged that some employees are losing their jobs, but they said they're nonetheless concerned about the precedent that would be set if they agreed to a revision in their existing contracts. A representative of the WashTech technology labor union, Priyanka Joshi, came to the protest and was planning to help the workers explore their options.

The mood on the street corner was relaxed. Some of the workers joked with organizer Palios about his meager sign. (Microsoft employees, as a rule, aren't exactly experienced with this whole protest thing.) But they made it clear that they were frustrated with the situation. And they got some broader attention: Television and newspaper reporters were there to cover the story.

Palios said he will protest at the corner Northeast 40th Street and 156th Avenue Northeast each evening for the next two weeks, and he encouraged others to join him.

First, however, he's planning to get some bigger signs.

Update: Ben Romano of the Seattle Times has an interesting profile of Palios.