Microsoft's Termination Letter For Underperforming Employees: Guise For Corporate Cost-Cutting?

Microsoft has faced a wave of backlash after a leaked termination letter revealed the company's new practice of swiftly cutting ties with staff deemed 'underperforming', even withholding healthcare benefits and, in several reported cases, refusing severance pay.

The letter, which has circulated widely on social media, has sparked debate over whether the technology giant is simply exercising its right to manage its workforce or engaging in insensitive cost-cutting measures at the expense of employee welfare.

Underperformance Allegations or Corporate Cost-Cutting?

According to Business Insider's report, affected employees are told their work no longer meets 'minimum standards and expectations'. They immediately lose access to all company systems, accounts and buildings, and are instructed to return Microsoft property without delay.

The letter also states that ex-employees are 'not to perform any further work on behalf of Microsoft' and warns that past performance will be reviewed if they ever reapply to the firm. In at least three instances, employees were told that they would not receive severance pay, while healthcare benefits end immediately on the date of termination.

'When people are not performing, we take the appropriate action,' a Microsoft spokesperson said, adding that the company prioritises 'high performance talent' while claiming to offer employees ample opportunity for professional development. However, the news has stirred strong reactions online. Commenters have accused Microsoft of blaming 'performance issues' to justify abrupt dismissals, particularly at a time when tech firms across the globe are reducing headcounts amid slower growth.

Ashley Stewart, a chief tech correspondent for Business Insider, posted the termination letter on LinkedIn, drawing widespread condemnation. 'Oh, so this is the new norm now?' wrote one commenter, who argued that publicly attributing redundancies to underperformance allows companies to distance themselves from any moral or financial responsibility towards the people they are letting go. Another user contended that such practices are reminiscent of employers' historical attempts to minimise costs linked to claims of unfair dismissal.

Comparisons to Musk's Controversial Strategy

Some critics suggest Microsoft might be emulating the approach taken by Elon Musk, who famously slashed roughly 80% of the workforce at X (formerly Twitter) through mass layoffs in 2023. In that case, employees protested in an open letter, demanding fair severance packages and criticising the manner in which cuts were handled.

Musk's termination emails similarly stated that staff members would stop working immediately, lose system access and be placed on a 'Non-Working Notice' period until their official end date. For some observers, Microsoft's move appears to be following a familiar pattern seen elsewhere in Silicon Valley, where underperforming teams are often the first targets when revenue growth slows.

Microsoft's Larger Workforce Reductions

Microsoft's decision to axe employees for alleged underperformance emerges alongside more extensive staff reductions across the company. Per Business Insider, teams in security, devices, sales, and gaming have also been affected, although spokespersons claim these broader cuts are unrelated to performance issues.

The firm previously let go of 10,000 employees after pandemic-driven hiring outpaced business needs. Over the last few months, managers have been required to meticulously evaluate workers up to level 80—one of Microsoft's highest positions—raising alarm among employees who fear the ongoing crackdown may continue.

Controversial terminations are not new for Microsoft. In 2024, the company faced criticism for firing its diversity, equity and inclusion (DEI) team, prompting doubts about its dedication to social causes. Later in the same year, two staff members who organised a vigil for Palestinians killed in Gaza were dismissed over the phone, having opposed Microsoft's sale of technology to the Israeli government. In both cases, the firm cited adherence to 'internal policy' but was condemned by human rights advocates who claimed Microsoft's actions contradicted its public statements on corporate responsibility.

A Look Ahead

As tech giants grapple with economic headwinds and conduct widespread layoffs, questions loom about whether performance-based dismissals will become more common. While some argue that companies have every right to remove employees who fail to meet expectations, others believe this practice risks undermining morale and loyalty, especially when severance and healthcare protections appear lacking. Critics say that the immediate revocation of benefits betrays a harsh approach to cost management, one at odds with the employee-centric culture many Silicon Valley firms claim to champion.