Microsoft offers exit option to thousands of employees, revamps pay and rewards system

In a significant move, Microsoft is offering a voluntary retirement option to 7% of its U.S. workforce, rather than resorting to immediate layoffs. This initiative is part of the company's strategic shift to adapt to the evolving demands of artificial intelligence (AI), which is transforming job roles and workforce requirements. According to a report by Bloomberg, this is a groundbreaking decision for Microsoft. While the precise number of eligible employees has not been disclosed, estimates suggest that nearly 9,000 workers may qualify, given that Microsoft reported around 125,000 employees in the U.S. as of June 2025. The program is aimed at employees at the senior director level and below, as outlined in an internal memo from Amy Coleman, the executive vice president and Chief People Officer. The eligibility criteria are based on a “Rule of 70,” which combines an employee's age and years of service at Microsoft to reach a total of 70 or more. Coleman expressed hope that this initiative would afford eligible employees the opportunity to transition on their own terms, supported generously by the company. In conjunction with the voluntary exit program, Microsoft is also overhauling its employee reward system, introducing performance-based bonuses and stock options. The company plans to streamline pay levels from nine tiers down to five and eliminate the previous performance “curve” system, which compared employees against one another. Moreover, Microsoft is decoupling stock rewards from cash bonuses, allowing managers greater flexibility in managing annual compensation without the need to directly link stock awards to cash bonuses. As Microsoft invests heavily in AI infrastructure and data centers to support cloud customers utilizing generative AI models, it remains committed to significant financial outlays. Recently, the company announced plans to invest $18 billion in AI cloud and infrastructure in Australia and a further $10 billion over four years in Japan to enhance its AI capabilities. This strategic direction aligns with similar efforts by major tech companies like Alphabet and Amazon, as they all vie to enhance their cloud and AI offerings in an increasingly competitive landscape.