Microsoft's large-scale voluntary severance program introduced this week has stunned the industry and raised questions from outsiders about why Microsoft would consider letting so many people leave. Inside the company, there is also widespread discussion: is the company trying to reduce 60,000 employees? Will AI replace these positions? Will there be more layoffs next? A recent report interviewed several anonymous Microsoft insiders to try to clarify the real situation behind the program.
From the information currently available, it appears that Microsoft simply caused employee panic unintentionally because the severance program's coverage was too broad, forcing management to quickly step in to reassure staff. Microsoft CFO Amy Hood explained in an internal memo that the program was launched to "allow employees who wish to leave to decide for themselves how to leave the company," and that only a "very small number of employees" were expected to accept it. Microsoft later further clarified that at most 3,000 employees were expected to ultimately accept the compensated departure, accounting for 5% or less of eligible employees.
Earlier this year, Microsoft launched a voluntary retirement compensation program based on employees' age and years of service, and about one-third of employees chose to accept it at the time. But not long afterward, Microsoft carried out another round of layoffs, and some employees who had declined the retirement compensation were ultimately still dismissed. According to the report, after this week's larger voluntary severance program was introduced, some also worried that Microsoft would continue laying off staff afterward. Microsoft responded by saying: "Future staffing arrangements will still depend on business needs and priorities."
However, several Microsoft executives interviewed believe outsiders misunderstood the purpose of this program. These executives could only discuss the teams they were responsible for, did not explicitly rule out the possibility of subsequent layoffs, and stressed that this program differs from the earlier voluntary retirement compensation in several important ways. One executive who requested anonymity said: "Microsoft is not planning to reduce 60,000 employees. We are not trying to replace everyone with AI." He further disclosed that Microsoft may have launched the new program to respond to dissatisfaction among some employees, because they had previously not been eligible to apply for retirement compensation.
The earlier retirement compensation program had one feature: after employees left, Microsoft would not hire replacements, but would directly eliminate the corresponding positions. This week's program is different. After some employees leave, the company will still recruit new people to fill the vacancies. Part of the reason the new program covers so many employees is that some department heads believed it would be simpler to have entire departments participate rather than screening eligible teams and employees one by one. One Microsoft executive explained: "It is easier to involve an entire large department." People familiar with the matter revealed that Microsoft executive Charles Lamanna, who is responsible for AI, Office, and Word businesses, decided to give all employees in his departments eligibility to apply. Even if some people accept the compensated departure, the departments are prepared to hire new people to fill these key positions.
Another Microsoft executive revealed that the core cloud computing and AI division adopted a slightly different arrangement. Among them, the Azure hardware systems and infrastructure team and the cloud operations and innovation team decided not to participate in this round of the severance program. Most other teams in the cloud computing and AI division opened eligibility to employees, and some positions can still be rehired after employees leave. Rehiring does not mean Microsoft cannot save on labor costs. One executive gave an example: if a senior employee leaves, the company may very likely find a less experienced employee to replace them, and the compensation paid may also be lower. However, a Microsoft spokesperson stressed that this is not the company's official position.
As for why Microsoft is not directly laying people off but instead adopting such a complicated arrangement, there may be another reason: Microsoft had previously been criticized for cutting U.S. employees while hiring foreign employees. Recently, the U.S. government suspended Microsoft's eligibility to participate in a federal employer sponsorship program that allows companies to sponsor foreign employees' applications for U.S. permanent residency. The White House accused Microsoft of dismissing American employees while hiring lower-paid foreign employees, but Microsoft denied this. One Microsoft executive also believes: "You cannot speak in absolutes, but everyone very much hopes to avoid large-scale layoffs, especially considering that Microsoft is an American company."
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