Earlier this week, Microsoft sent an internal memo to employees in the US, around the same time when Meta informed its staff that it was firing roughly 8,000 workers. But Microsoft’s memo was not about layoffs. It was different. It was about offering a voluntary exit to select employees, in particular, the oldest employees working at the Redmond giant.
Now, what actually is a voluntary exit? A voluntary exit allows a company to buyout the contract employee. Usually, the employee gets a severance package, and in return, the employee leaves the company. At a time when most companies like Amazon and Oracle are firing workers, Microsoft is seemingly giving the choice to its old guard.
Microsoft’s chief people officer, Amy Coleman, wrote in the memo, “Our hope is that this program gives those eligible the choice to take that next step on their own terms, with generous company support.” The company is expected to send the offers on May 7.
But before we understand why Microsoft is giving this option specifically to senior workers, do note that the company laid off around 15,000 workers last year.
Microsoft’s oldest employees can take voluntary retirement
As per reports, this voluntary exit is offered only to the most senior staff at Microsoft. The programme is open to US workers who are at the senior director level and below, and those whose years of employment and age add up to 70 or higher. That is, an employee aged 50 who has worked for 20 years will be eligible, and so would someone who is 55 but with over 15 years of work experience under their belt.
About 7 per cent of Microsoft’s US team, which is believed to have around 1,25,000 employees, is believed to be eligible for this buyout. This translates to roughly 8,750 employees. While Google has previously offered voluntary exits to some employees, it was on a smaller scale and not specific to age or experience.
But these are not layoffs. The employees have the option to take it or not. That is, Microsoft likely expects that not all of these 8,750 people will accept this offer. However, this is the first time in history that Microsoft is offering voluntary exits at this scale. Perhaps the company is confident that at least a good number of people will choose it.
And why did Microsoft decide to take this step? Well there are broadly two reasons.
1. Older employees get paid more
This is quite straightforward. Senior level workers get paid more, that’s a fact. A person who has worked for 20 years, will most likely be paid more than someone who just started out two years ago. And this means that by cutting down on senior-level staff, Microsoft will save much more money in salaries and benefits than by laying off entry or mid-level workers.
And Microsoft needs that money. AI is not cheap. Companies like Google and Amazon are spending billions, and Redmond can’t be left behind. The company is embracing AI too. Microsoft, which previously relied on external companies like OpenAI and Anthropic, is now building its own AI models under Mustafa Suleyman. The company already has over 70 different Copilot branded AI tools, with signs of no slowing down.
2. Older employees likely least open to AI
With every generation, technology evolves. And the newer generation is often more open to new tech. Look at your life, your parents are likely not as tech-savvy as you are, and your younger cousin seems to be miles ahead of you when it comes to watching Reels on Instagram.
The same blueprint applies to workplaces too. Yes, the senior staff at Microsoft are good at their jobs. The people who will receive the buyout offers likely built the foundation for the company’s software two decades ago, at a time when we were still using Windows XP. But today, using AI to write code, or completing projects may not be their cup of tea. They may understand that their juniors are just better suited for it.
And perhaps that is exactly why Microsoft is giving them the offer to take a voluntary retirement. A 60-year-old employee may think of this as a way to leave the company respectfully, at his or her peak, instead of being shown the door after another round of layoffs. In a way, for that employee, it would feel like he did his work for the world of tech, and now it was just the right time to pass the baton to newer folks.