While the stock options move should prove cost neutral, it is designed to compensate those staff lower down the pecking order who have suffered from the firm's lower stock price as a result of the worsening industry market.
On top of their salary freeze, top level management are excluded from the stock option deal.
Reuters says Intel plans to exchange options with an exercise price above the stock's 52-week high, for a lesser number of new options that have about the same "fair value" as those surrendered.
The plan is designed to help motivate and retain employees who have seen their stock options become a less valuable part of their compensation package in the economic downturn.
Earlier this year, Intel announced the closure of two chip manufacturing plants and two test facilities, with up to 6,000 job losses expected by the end of the year as a result.
The closures are part of plans to "align manufacturing capacity to current market conditions", said Intel.
The older US manufacturing plants at Hillsboro, Oregon, and Santa Clara, California, are closing, along with test facilities in Malaysia and the Philippines.
For its full-year results posted at the turn of the year, Intel said sales were down 2% and profits had tumbled 24%. It came as no surprise, however, as Intel had previously issued two advance profit warnings for the period.
Smaller rival AMD has also made job cuts. The most recent publicly announced batch was 500 jobs slashed at the end of last year.