Microsoft is opening a voluntary exit route for thousands of long-serving employees in the United States, marking the first retirement buyout programme in the company’s 50-year history.
The scheme, first outlined internally last month, has now been detailed through Microsoft’s HR systems, according to reporting by The Verge. The programme targets employees whose combined age and years of service total at least 70, positioning the move as a structured workforce transition rather than another round of compulsory layoffs.
The initiative comes after Microsoft spent much of the past year tightening costs through job cuts, even as the company continued investing heavily in artificial intelligence infrastructure and cloud expansion.
The programme could affect nearly 8,750 employees, or around 7 per cent of Microsoft’s US workforce, based on figures cited in reports. As of June 2025, Microsoft employed about 228,000 people globally, including roughly 125,000 in the US.
Healthcare and severance form core of the package
Employees opting into the scheme will receive healthcare support for up to five years.
Microsoft will fully cover medical, dental, vision and wellness expenses during the first year. Employees can continue coverage for another four years by paying monthly premiums themselves.
The company has also structured severance payouts according to employee seniority and tenure.
Key elements of the retirement package include:
• Employees at level 64 will receive one week of base pay for every six months worked at Microsoft
• Employees at levels 65 to 67 will receive two weeks of pay for every six months of service
• Total severance payouts will be capped at 39 weeks of pay
• Employees will receive six months of vesting on unvested stock awards
• Staff with 24 years or more of continuous service will receive 12 months of stock vesting
• Eligible employees will have 30 days to decide whether to accept the offer
According to reports, Microsoft expects to take a one-time charge of about $900 million linked to the programme during the current quarter.
A softer alternative to layoffs
The retirement programme reflects a different approach from the workforce reductions that swept across the technology sector over the past two years.
Rather than eliminating positions directly, Microsoft is offering employees the option to leave with financial and healthcare protections attached. The strategy may help reduce workforce costs while avoiding some of the reputational and operational disruption associated with large-scale layoffs.
“Our hope is that this program gives those eligible the choice to take that next step on their own terms, with generous company support,” Amy Coleman, Microsoft’s executive vice president and chief people officer, said in a memo viewed by CNBC.
The move also highlights how major technology companies are recalibrating labour structures as spending priorities shift towards AI development and data centre expansion.
Compensation systems are also changing
Alongside the retirement initiative, Microsoft is revising internal performance and compensation systems.
According to details cited in reports, managers will no longer be required to directly align stock rewards with cash bonuses during annual compensation reviews. Coleman reportedly told employees the change would give managers “more flexibility to meaningfully recognise high performance.”
Microsoft is also simplifying its employee review structure. Managers will now choose from five performance categories instead of nine, in a move aimed at speeding up evaluations and reducing complexity across teams.
The changes suggest Microsoft is pursuing a broader overhaul of workforce management, balancing cost discipline with efforts to retain high-performing employees in strategically important areas.
While the voluntary retirement scheme is currently limited to the US workforce, the programme signals how one of the world’s largest technology employers is adapting to a changing business environment shaped by AI investment pressures, slower hiring growth and demands for greater operational efficiency.