Microsoft’s massive employee buyout stunned the industry this week, raising urgent questions about why the software giant might want so many people to leave.
Within the company, worried staff debated the meaning of this decision. Why would Microsoft want to lay off 60,000 employees? Will roles be replaced by AI? Are there more layoffs coming?
Business Insider has spent the past few days speaking with Microsoft insiders to find out what’s really going on. The people asked not to be identified discussing sensitive topics.
The main takeaway so far is that Microsoft appears to have unnecessarily scared its employees with the sheer scale of its buyout offer, leaving executives scrambling to calm the troops down.
Chief Financial Officer Amy Hood explained in an internal memo that the offer was intended to “provide employees with freedom of action if they choose to leave the company on their own terms” and said the company expected “very few people” to accept it.
Microsoft then doubled down and told Business Insider that it expected 3,000 employees or fewer to take the buyout. That’s only about 5%, or less, of those eligible.
Dismissal issues
Earlier this year, the company offered a pension buyout to employees based on their age and length of service. About a third agreed.
Shortly after, Microsoft made another round of layoffs. Some employees who did not accept the retirement offer ended up losing their jobs.
That has led to speculation that more layoffs could come following this week’s larger buyout offer.
“Future workforce requirements will continue to be based on business needs and priorities,” Microsoft said in a statement.
Misconceptions and differences
Business Insider spoke with Microsoft executives who said there are misconceptions about the current buyout offer.
These leaders could only speak about their own teams and were reluctant to definitively say there would be no layoffs. However, they highlighted some differences between current buyouts and the pension offering.
“Microsoft doesn’t want to lose 60,000 people,” said one executive, speaking on condition of anonymity. “We are not replacing everyone with AI.”
This person believes Microsoft made the latest buyout offer because some employees complained about not being eligible for the retirement buyout earlier this year.
And in the case of the buyout of retirements, when the employees left, Microsoft did not fill these positions: the workforce disappeared.
This week’s buyout works differently. In some cases, when staff leave the company, their roles will be replaced by new recruits.
Why the latest buyout seems so important
One reason the latest buyout seems so huge: Some executives decided it would be simpler to offer it to their entire organization, rather than trying to choose which specific teams or individuals should be included.
“It’s easier to join giant organizations,” a Microsoft executive told Business Insider.
Charles Lamanna, responsible for the Copilot platform, AI agents, Office and Word, decided to offer it to everyone in his organization, one of the people said. This includes many people in critical positions. The organization is prepared to fill positions if any of these essential employees accept the buyout, this person said.
The Cloud + AI group took a different approach
Microsoft’s key Cloud + AI division has taken a slightly different approach, according to another company executive.
Two teams – the Azure Hardware Systems and Infrastructure and Cloud Operations + Innovation teams – decided not to offer the final buyout to staff.
Most of the other groups in the Cloud + AI division have offered buyouts to employees. And this division can fill certain roles, this executive told Business Insider.
Reduce costs and avoid layoffs
Replacement roles could further help Microsoft reduce labor costs. A company executive said that if a senior person were to leave, they would likely replace the position with a more junior person who would potentially be paid less. A Microsoft spokesperson said this was not an official company position.
If this all seems too complex, compared to layoffs, there may be a reason: Microsoft has been criticized for reducing its U.S. workforce while employing foreign workers.
The Trump administration recently suspended Microsoft from a federal program that sponsors foreign workers for permanent residence, accusing the company of lay off American employees while hiring lower-paid foreign workers. Microsoft has denied these claims.
“You should never say never, but there is a lot of desire not to do big layoffs, especially as an American company,” one of Microsoft’s executives told Business Insider.
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