Microsoft Chairman and CEO Satya Nadella on Wednesday said the company would reduce its overall workforce by 10,000 jobs, representing less than 5% of its total employee base.

The US-based software giant became the latest big tech firm to reduce its workforce during a global economic slowdown. Microsoft has about 220,000 employees globally.

In a memo, Nadella said that the reduction of 10,000 jobs would happen through the end of Q3 FY23, with some notifications happening today. He added, “While we are eliminating roles in some areas, we will continue to hire in key strategic areas.”

“We know this is a challenging time for each person impacted. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible,” Nadella elaborated.

According to the Microsoft chief, the affected employees in the US will receive benefits, including above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination, regardless of whether such notice is legally required.

For the affected employees outside of the US, the benefits will align with the employment laws in each country.

This round of job cuts is significantly larger than other rounds of workforce reduction at the company in the last year, which impacted less than 1% of its workforce.

The current job cuts at Microsoft are larger than the one in 2009 (5,800 jobs) but fewer than the workforce reduction in 2014 (18,000 jobs), which happened after Nadella’s appointment as the CEO.

The tech world is seeing massive layoffs, and Microsoft is the latest to announce job cuts in the face of a challenging economy.

Recently, Amazon disclosed its plan to reduce its headcount by 18,000 globally, or about 6% of its workforce. In November, Meta CEO Mark Zuckerberg announced the social media giant would reduce the size of its team by about 13%, cutting over 11,000 jobs. In the same month, Elon Musk reduced half of Twitter’s workforce or about 3,700 jobs.

The announcement of the layoffs has come before Nadella updates investors on the company’s financial performance next week. Microsoft will publish its second-quarter financial results for the fiscal year 2023 after the market closes on January 24, 2023. 

The layoffs will result in Microsoft “taking a $1.2 billion charge in Q2 related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces,” Nadella said.