Voluntary buyouts are having a moment in Big Tech.
Workers at Google recently pressed the search giant to make the exit offers a standard first step whenever it plans job cuts — and to extend them to all members of affected teams, regardless of tenure. Microsoft, meanwhile, launched its first broad voluntary retirement program this past spring, offering packages to thousands of longtime US employees. It said that more than 30% of those eligible accepted.
The developments are raising broader questions in tech, where many once-scrappy startups are now sprawling corporations — and where repeated rounds of layoffs have eliminated scores of jobs in recent years.
Now that many of those businesses have workforces that include employees with decades of service, are buyouts — long part of the workforce-reduction playbook at legacy companies from Boeing to General Motors — a fairer, less painful way to reduce head count than layoffs? And should they remain reserved for veteran employees, as they traditionally have been, or be offered more widely?
“Buyouts are becoming increasingly compelling for older Silicon Valley companies,” said Laszlo Bock, a former Google head of human resources who now advises CEOs. “They have more eligible people, and it’s a softer message for morale.”
A ‘more humane’ approach
Nearly 100 Google employees rallied this month outside the company’s Mountain View headquarters, arguing that the company’s past use of selective exit offers should become a broader and more consistent policy. As part of the event, the union presented a petition signed by more than 4,500 Googlers calling for improved layoff protections.
Voluntary buyouts “provide agency to workers,” said Emma Jackson, a Google employee of more than 20 years and a leader of the Alphabet Workers Union. Alphabet is Google’s parent company.
Jackson said workers nearing retirement might have accepted buyouts in earlier rounds of layoffs at Google, reducing the number of cuts needed. She called the approach “more humane.”
Google didn’t respond to requests for comment from Business Insider. The company said in a Wednesday securities filing that its workforce grew by nearly 12,000 employees over the past year, reaching about 199,000 at the end of June.
Microsoft announced its retirement program in April, making it available to employees whose age plus their years of service totaled at least 70. The company then cut about 4,800 jobs earlier this month.
Those who accepted Microsoft’s retirement offer received a payout based on seniority and tenure, plus up to five years of health insurance coverage. Still, the formula meant some employees became eligible well before a conventional retirement age, forcing them to weigh whether to leave careers they had not expected to end anytime soon.
At 47, retirement wasn’t on Marisela Cerda’s radar. Yet Cerda, a principal customer experience manager at Microsoft who joined the company after college in 2001, was among those who received an exit offer.
Although she ultimately decided to stay, Cerda previously told Business Insider that she stuck around as long as she has because of the opportunity to keep learning about emerging technologies and the relationships she’s built with colleagues over the years. The offer prompted Cerda to think more urgently about the next phase of her career.
“You move toward what you want more of, versus moving away from things you don’t want,” she said.
A Microsoft spokesperson declined to comment further.
Why the calculus may be changing
As Silicon Valley companies grow older alongside their workforces, buyouts may grow more attractive, said Josh Bersin, an HR analyst and consultant. Forcing veteran employees to leave through layoffs “creates a lot of bad blood,” he said.
Peter Rahbar, a New York employment attorney and cohost of the “Across the Bar” podcast, said buyouts might not reduce staff as quickly as layoffs, but they don’t carry the same “huge” morale costs for those who remain — or for potential future hires.
“How you treat people on the way out is certainly something people look at on the way in,” he said.
There are downsides for employers, however. Offering buyouts can make labor reductions less predictable, said Jay Zagorsky, a professor at Boston University’s Questrom School of Business. If too few employees accept, a company may still need to make cuts to reach its target.
“With a layoff, there’s certainty,” he said.
Extending buyout offers to everyone, including those who’ve logged only a few work anniversaries, also carries drawbacks.
“People whom you would prefer to stay might leave,” and they could go to a competitor, said Bock, the former Google executive.
The risk is especially concerning for companies with what he calls “spiky talent,” where a small number of employees create disproportionate value.
“That’s characteristic of Silicon Valley companies,” he said.
For workers who receive a buyout offer, Rahbar, the employment attorney, said they should understand how accepting it would affect their retirement benefits, stock awards, deferred compensation, and healthcare coverage. Depending on a company’s plans, employees who retire may continue vesting in certain benefits or retain those they have already earned, he said.
Buyout packages also tend to be more generous than the severance offers, Rahbar added, and there’s an emotional difference between choosing to leave and being told to go.
“People are feeling good about leaving on their own terms,” he said. “With a layoff, they’re clearly not.”
