Microsoft institutes “zero severance” layoffs in aggressive performance crackdown for employees in 2025

Microsoft has escalated its workforce optimization strategy by implementing immediate terminations for employees deemed underperforming, according to internal documents obtained by Business Insider and The Economic Times. At least three cloud infrastructure engineers in Redmond, Washington, lost jobs on January 31, 2025, without severance pay or extended benefits—a policy shift diverging from tech industry norms.

Microsoft’s new policy

1. Instant termination protocol: Termination letters state employees are “relieved of all duties effective immediately,” with building access and accounts deactivated within hours. Healthcare, dental, and prescription benefits end the same day, leaving affected workers without coverage.
2. Severance elimination: Three confirmed cases received no financial compensation beyond final paycheck proration. A spokesperson stated these cuts target “chronic underperformers,” asserting roles may be backfilled with new hires.
3. Reapplication restrictions: Laid-off workers face permanent employment barriers: future applications will consider “past performance and basis of termination,” per termination notices.

Zero severance layoffs

The United Tech Workers union alleges 127 terminations occurred company-wide this week, though Microsoft maintains these are isolated performance cases.

Washington State’s Worker Adjustment and Retraining Notification (WARN) Act requires 60-day notices for mass layoffs, but the tech giant claims exemptions by classifying these as “individual performance actions.” Employment attorney Lisa Ropple told The New York Post: “This creates a loophole allowing companies to bypass worker protections by labeling layoffs as performance-based.”

Internal Slack channels reveal employee backlash, with 340+ messages under #NoSeverance criticizing opaque evaluation criteria. One terminated engineer stated: “My Q4 review praised ‘exceeding expectations,’ yet HR cited undefined ‘business critical objectives’ failures.”

These cuts follow Microsoft’s January 2025 reductions in gaming (1,900 jobs) and security divisions, part of a broader $3B cost-cutting initiative. CFO Amy Hood emphasized “workforce optimization” during the Q3 earnings call, coinciding with a 6% stock drop linked to AI spending concerns.