Microsoft has introduced a significant change in how it handles underperforming employees, offering them a stark choice: accept a severance package and leave, or face the pressures of a performance improvement plan (PIP).

According to a report by Business Insider, the tech giant is now offering certain employees who are not meeting expectations a voluntary exit option. These employees are being given five days to decide whether to accept 16 weeks of pay and depart from the company. Should they decline, they will be placed on a PIP—a formal process that could ultimately lead to termination if performance does not improve to the required standard.

The announcement was made via an internal email from Microsoft’s newly appointed Chief People Officer, Amy Coleman. In her message, Coleman described the move as part of a broader effort to introduce greater transparency in how performance issues are addressed. “This is about providing choice to employees,” she said, emphasising that the new system aims to treat staff more fairly by giving them options rather than proceeding immediately to dismissal.

However, the conditions are strict. Once an employee opts for the PIP route, they lose eligibility for the 16-week severance offer. Furthermore, individuals who either leave during or after the PIP process, or who receive low performance ratings, will face additional restrictions. They will be barred from reapplying to Microsoft for two years and will not be permitted to transfer to different roles within the company.

The policy shift has drawn comparisons to Amazon’s controversial "Pivot" programme, which similarly offered severance packages to employees deemed underperforming. Amazon’s programme faced significant criticism, with claims that it was more about managing exits than fostering employee growth—a concern that now hangs over Microsoft’s new strategy as well.

While Microsoft has not issued a public comment regarding the new initiative, analysts suggest it signals a move towards maintaining a workforce comprised only of high performers. This aligns with broader trends in the tech sector: earlier this year, Meta also took aggressive steps to remove underperforming staff, including blocklisting thousands of employees from future rehiring opportunities.

One key uncertainty remains: how this new policy will be implemented outside of the United States, where employment laws and regulations can significantly differ. Countries with stricter labour protections may require modifications to Microsoft's approach.

Nevertheless, the message coming from Microsoft’s leadership is clear—employees must meet expectations or prepare to exit. As the company tightens its focus on top performance amidst broader industry pressures, underperformers are left with little room for manoeuvre.

This shift also reflects a changing tone in Silicon Valley, where once-generous employment cultures are giving way to more hard-edged strategies aimed at efficiency, competitiveness, and long-term profitability.