Employee buyouts like Microsoft's could become more common. Here's what workers need to know.

By Hannah Pedone and Aditi Shrikant

'Hiring is very sluggish and turnover is very sluggish'

Microsoft's first-ever voluntary employee-buyout program will reportedly be offered to up to 7% of the company's US workforce.

Concerns over the labor market came into full force on Thursday as Microsoft announced a retirement-buyout program in a memo to a subset of employees.

A spokesperson for Microsoft (MSFT) confirmed to MarketWatch that a memo was sent out to employees, though did not provide details of the program.

According to a report from CNBC, the company's first-ever voluntary employee-buyout program will be offered to up to 7% of the company's U.S. workforce. To be eligible for the program, workers must be at the senior-director level or below. In addition, their years of employment at the company combined with their age must add up to 70 or more.

In today's job market, buyouts like what Microsoft is proposing might become more common, said Daniel Zhao, chief economist at Glassdoor.

"Hiring is very sluggish and turnover is very sluggish," he said. "Many of these companies are turning to layoffs or buyout packages to increase attrition."

Nike (NKE), Amazon (AMZN) and reportedly Oracle (ORCL) have all embarked on workforce reductions in recent weeks.

How to know if you should take a buyout

Some workers are more equipped to take a buyout than others, depending on their level of financial security. If you've already met your retirement goals - meaning you have enough money saved to live off for the rest of your life - taking the package and retiring could make sense, according to Zhao.

But if you're planning to take the buyout and return to the job market, you should prepare to be unemployed for a while, Zhao said: "It is important for workers to know that they will be out of work for longer than you might think."

This means that your emergency savings need to be able to sustain you for at least a year.

"Hiring has cooled over the last few years, especially in tech," he said. "For older workers, ageism might make it difficult to find a new job. It's important to have a financial buffer to justify taking this offer."

Retirement isn't just about money

Making sure your finances are in order before accepting a buyout package is important, but retiring isn't only a financial decision, it's also a lifestyle one. Before taking a buyout and leaving the workforce, it's important to mentally prepare yourself for what this will mean for your well-being, said Maggie Mulqueen, a psychologist who works with retirees.

Many people who retire earlier than they'd like struggle to find a cohort, or group of people experiencing the same life transition.

"You might all of a sudden find yourself in suburbia and there is no one that you know or who looks like you," she said. "If you didn't make those connections in your community along the way, how are you going to find people who make you feel like your presence matters?"

People contemplating leaving the workforce should consider questions like: What hobbies or interests do they want to nurture? Do they have family close by they would like to see more?

Someone whose identity is strictly about their career is more likely to feel as if retirement is "like falling off a cliff," Mulqueen said.

Workers who are weighing retiring and have a partner should discuss the decision with them before even considering a buyout, Mulqueen said. Yes, it's your job, but your retirement will affect their day-to-day life greatly.

Mulqueen has counseled couples where one party retires and expects much more attention now that they are home more. She suggests talking with a partner about what the day-to-day would look like for you as a newly unemployed person and how you would like your partner to complement that.

"If the couple doesn't talk about [the buyout] or the ramifications and the decision is made unilaterally, it's very problematic and stressful on the marriage," she said.

From the archives (Feb. 2025): Why buyout offers - like Trump's to federal workers - are a hard sell for employees

-Hannah Pedone -Aditi Shrikant

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04-24-26 1112ET