Microsoft has initiated another round of job reductions, impacting approximately 4,800 employees globally, which equates to about 2.1 per cent of its total workforce. Following the layoffs, the company is reportedly providing one of the most generous severance packages in the technology sector. According to Business Insider, certain laid-off employees in the United States will receive severance pay amounting to up to 39 weeks of their base salary, depending on their role and the duration of their employment.

The severance structure includes an initial payment of at least 60 days of base pay as affected workers remain on the payroll. Following this period, the subsequent severance amount will vary according to the employee’s seniority and years of service, potentially reaching nearly nine months’ worth of pay.

The criteria for eligibility in this severance package hinge on the employee’s internal level within the organisation. Specifically, those at levels 64 and below will receive one week of base pay for every six months worked, while employees at levels 65 to 67 are set to receive two weeks for every six months. Executives situated at higher levels are subject to a distinct compensation framework.

Additional Support Beyond Severance Pay

In addition to the financial severance, Microsoft is extending various levels of support to affected employees. The assistance includes continuous stock vesting for either six or 12 months, based on tenure, ensuring that employees maintain some level of investment return. Furthermore, workers will benefit from six months of paid health insurance and have the option to extend their healthcare coverage via COBRA for an extra year at their own cost.

This severance package bears similarities to the voluntary retirement options Microsoft unveiled earlier in the year; however, it notably includes a shorter duration for company-funded health insurance compared to previous offers.

The recent layoffs arise as Microsoft continues to focus heavily on artificial intelligence initiatives, reportedly allocating around $190 billion towards capital expenditures in 2026. A significant share of this budget is directed towards enhancing AI infrastructure and expanding data centre and cloud computing capacities.

Impact on Various Divisions and Response from Leadership

The layoffs are affecting multiple departments within Microsoft, with its sales teams and Xbox gaming division being significantly impacted. Internal messages indicate that this round of job cuts represents one of the most substantial restructurings in Xbox’s history. Approximately 3,200 positions are projected to be eliminated across the Xbox division during the current financial year, which includes around 1,600 roles being cut immediately.

Xbox leadership has expressed that these decisions do not reflect the ability or commitment of those affected, acknowledging the considerable difficulty in reaching such conclusions. They elaborated that the gaming division has been facing challenges related to reduced profit margins, increased costs, and a slowdown in hardware growth.

The leadership also mentioned plans to streamline the organisational structure by reducing the number of management tiers and concentrating investments on priority projects to improve the situation. Comparatively, the severance packages offered by Microsoft appear to be more substantial than those provided by other prominent technology firms. Business Insider noted that companies like Salesforce typically offer between nine and 30 weeks of base pay, while Oracle provides up to 26 weeks based on service tenure. Additionally, Meta’s recent severance for laid-off US employees consisted of 16 weeks of base salary, plus an extra two weeks for each year of service.

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