Microsoft
Microsoft allocates $190B this year to rapidly build AI infrastructure, shifting resources from traditional roles to data centres and high-performance chips. Photo: AFP / Jason Redmond

Thousands of tech workers woke up this week to life-changing news. Microsoft has confirmed plans to make around 4,800 employees redundant. The move accounts for roughly 2.1 per cent of its global workforce. For many employees, the news brings sudden uncertainty. Career paths built over years have dissolved overnight. Yet, as the initial shock settles, details of the exit terms reveal a surprisingly cushioned landing.

The tech giant is offering up to 39 weeks of base pay for most US workers. These generous terms reflect a bitter reality across the industry. Tech giants are aggressively trimming staff to fund massive investments in artificial intelligence.

Inside the Severance Offer

The package aims to ease the immediate transition for departing staff. Every laid-off US employee receives a minimum of 60 days of base pay. During this initial two-month period, workers remain on the official payroll. After that initial window, payouts depend on length of service and corporate rank. Employees at internal levels 64 and below receive one week of base pay for every six months worked. Those at levels 65 to 67 get two weeks of pay per six months. A distinct package exists for executives at level 68 and higher.

Financial safety nets extend beyond direct salary payments. Microsoft will continue regular stock vesting for six or 12 months for workers at level 67 and below, based on tenure. Health coverage also forms a key part of the deal. Microsoft is providing six months of paid health insurance. Staff can then access an additional 12 months of optional COBRA coverage. These terms mirror voluntary retirement buyouts offered by the firm earlier this year, though with shorter health coverage periods.

Funding the AI Gamble

Why is a profitable corporate titan making these cuts now? The answer lies in the relentless race for artificial intelligence dominance. Chief people officer Amy Coleman outlined the strategy in an internal email. The job cuts primarily hit the sales and Xbox gaming divisions. Within the Xbox unit, management plans to reduce headcount by 20 per cent by late June.

At the same time, Microsoft is pouring vast fortunes into capital spending. The firm plans $190 billion in capital expenditure this year. The vast majority of this capital directly supports the rapid buildout of AI infrastructure. To lead in this new era, Microsoft is shifting resources at speed. Traditional roles are giving way to server racks, data centres, and high-powered chips.

How Microsoft Compares to Rivals

Microsoft's exit terms stand out as notably more generous than competitors across the sector. Salesforce recently conducted its own round of redundancies. Its standard package offered a minimum of nine weeks and a maximum of 30 weeks of base pay.

Oracle took an even leaner approach for US staff. Its deal provided four weeks of base salary, plus one week per additional year worked, capped at 26 weeks. Meta offered laid-off US employees 16 weeks of base pay, plus two weeks for each year of continuous service. In comparison, Microsoft's 39-week maximum offers former employees a significantly longer runway to rebuild their careers.

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