Microsoft layoffs explained: Why some of the 4,800 laid-off employees could receive up to 39 weeks' pay

Microsoft's latest round of job cuts has once again put the spotlight on the changing priorities of the technology industry. The company is laying off around 4,800 employees, roughly 2.1 per cent of its global workforce, as it continues to reshape parts of its business while investing heavily in artificial intelligence.

The layoffs have affected several divisions, particularly Microsoft's commercial sales organisation and its Xbox gaming business. Yet alongside concerns over job losses, another aspect of the announcement has stood out: the severance package being offered to affected employees.

For some US-based workers, the exit package could include up to 39 weeks of base salary, continued stock vesting and extended healthcare coverage, making it one of the more comprehensive severance plans announced by a major technology company in recent years.

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Here's a closer look at what Microsoft is offering, who qualifies and why the company is restructuring despite posting strong financial results.

How Microsoft's severance package works

The benefits offered to departing employees are not identical across the workforce. Instead, compensation varies according to an employee's level within the company and the length of time they have worked at Microsoft.

According to severance documents reviewed by Business Insider, affected US employees will initially remain on Microsoft's payroll for at least 60 days, continuing to receive their normal base salary during that period.

Once that notice period ends, severance payments begin.

Employees classified at internal levels 64 and below are eligible for one week's base pay for every six months they have worked at the company. Those in levels 65 to 67 receive two weeks of base pay for every six months of service.

Depending on tenure, this means some employees could receive as much as 39 weeks of salary, equivalent to roughly nine months' pay. Employees at level 68 and above are covered under a separate executive compensation programme.

It's not just about salary

The financial support extends beyond a severance cheque.

Many Microsoft employees receive a significant portion of their overall compensation through stock awards. To ease the transition, the company will continue stock vesting for eligible employees for between six and 12 months, depending on their years of service.

Healthcare benefits are also being extended. Microsoft will continue paying for health insurance for six months after an employee leaves. After that, affected workers can continue their coverage for up to another year under COBRA, although they will need to pay the required premiums themselves.

Taken together, these measures are intended to provide employees with financial stability while they search for new opportunities, allowing them to retain both healthcare access and part of their equity compensation during the transition.

Why is Microsoft cutting jobs now?

The restructuring comes at a time when Microsoft's business remains financially strong. Instead of responding to weak earnings, the company says it is reorganising its workforce to better align with changing customer needs, evolving technology and its long-term strategy.

The company has said the latest restructuring is aimed at reducing management layers, streamlining operations and redirecting resources towards strategic priorities. While these point at the investment in AI, the company has claimed the recent layoff wave was not because of AI.

The commercial sales division and Xbox gaming business have been among the hardest hit, with reports suggesting that around 1,600 employees from Microsoft's gaming operations are expected to lose their jobs.

Microsoft has also rejected the suggestion that the layoffs are simply about replacing employees with AI tools. In a message to staff, Chief People Officer Amy Coleman said the company was adapting to shifts in technology, customer expectations and business models, requiring a different organisational structure rather than a straightforward substitution of people with AI.

The layoffs nevertheless reflect a broader trend across the technology industry. Companies including Amazon and Meta are investing billions of dollars into AI infrastructure while simultaneously trimming headcount in other parts of their businesses. Investors, meanwhile, are increasingly pushing companies to balance record AI spending with tighter operational costs.

For Microsoft employees affected by the latest cuts, the severance package offers an important financial cushion during an uncertain period. But the broader message is harder to ignore. As AI reshapes how technology companies allocate talent and capital, workforce restructuring is becoming a recurring feature of an industry investing aggressively in its next phase of growth.