July 2 (Bloomberg) -- Lehman Brothers Holdings Inc., the securities firm that's saving cash following its first quarterly loss, is increasing the stock portion of employee pay this year, a person with knowledge of the matter said.

The ratio of stock awards in pay packages will rise to a maximum of 65 percent of total compensation from 50 percent, the person said. The decision was announced within the New York-based company today. Employees will receive a mid-year advance equal to one-fifth of their stock award last year, according to the person.

Lehman, the fourth-largest U.S. securities firm, paid out about $3 billion in company shares to employees last year, according to CreditSights Inc. By increasing the ratio of stock in compensation and not buying back shares as in the past, Lehman can boost capital by as much as $4 billion this year, said CreditSights analyst David Hendler.

``They can generate internal capital and keep nervous employees focused on their work,'' said Hendler in an interview. ``They probably need the additional capital for further mark- downs on their mortgage portfolio down the road.''

Lehman shares rose $1.40, or 6.7 percent, to $22.36 at 4:08 p.m. today in New York Stock Exchange composite trading. They've declined about 66 percent this year.

The firm decreased the vesting period for restricted stock awards to three years from five, to bring it in line with rival firms' rules, the person familiar with today's decision said.

Lehman lost $2.8 billion in the second quarter, the first quarterly loss since going public in 1994, because of writedowns on mortgage-related assets. After selling $16 billion of such assets, the firm still owns $64.7 billion of mortgages, bonds backed by commercial and residential loans and real estate.

To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net.

Last Updated: July 2, 2008 16:10 EDT