Microsoft will offer voluntary retirement to thousands of employees in a first for tech giant

Microsoft is offering a one-time voluntary retirement program for the first time in its 51-year history, giving thousands of long-serving U.S. employees a chance to leave with a financial payout and extended healthcare as it works to control costs amid a massive buildup in AI infrastructure.

An estimated 7% of Microsoft’s 125,000-person U.S. workforce, or about 8,750 employees, would be eligible based on a formula that takes into account their years at the company and their age.

It’s a highly unusual move in the tech world. Voluntary retirement programs are common in older industries, such as telecom and manufacturing, but the largest tech companies have instead turned to layoffs, stricter performance reviews, and return-to-office policies to thin their ranks. 

Microsoft itself laid off more than 15,000 employees last year and began requiring workers in the Seattle region to return to the office three days a week in February.

The retirement program was outlined Thursday in a memo to employees from Chief People Officer Amy Coleman, who described it as a one-time offering for long-serving workers.

The program is open to U.S. employees at Level 67 — the equivalent of senior director — and below, excluding those on sales incentive plans, whose years of service plus age total 70 or more. Eligible employees will be notified May 7 and will have 30 days to decide.

“Many of these employees have spent years, and in some cases, decades, shaping Microsoft into what it is today,” Coleman wrote. “Our hope is that this program gives those eligible the choice to take that next step on their own terms, with generous company support.”

In the same memo, Coleman outlined changes to Microsoft’s compensation system, reducing the number of pay levels from nine to five. It’s also decoupling stock awards from bonuses, giving managers flexibility to use stock to reward long-term contributors regardless of their latest performance rating.

Microsoft isn’t providing specific details of the retirement package yet, saying eligible employees and their managers will receive more information on May 7. Details of the healthcare component will be significant for employees who are not yet old enough to qualify for Medicare at age 65.

There are not expected to be any restrictions on future employment for those who take the deal. 

The program would take effect in Microsoft’s fiscal fourth quarter, and CFO Amy Hood is expected to discuss it on the company’s earnings call next week.