A layoff notice from Microsoft starts five time-sensitive clocks that most employees don't know about. On June 30, 2026, Microsoft announced it's cutting thousands of employees, less than 2.5% of its global workforce, across Xbox, sales, and consulting. If you're in this round, the decisions in front of you have hard deadlines. Miss one and you lose money, lose coverage, or lose the right to negotiate. This article walks through every deadline, in order of urgency, so you don't miss anything.

What happened

Microsoft announced the layoffs on June 30, 2026. The cuts span the Xbox gaming division, sales, and consulting, reflecting a broad restructuring across multiple business units. Severance terms haven't been disclosed publicly. The rest of this article assumes you've received or are about to receive a formal notice and separation agreement.

What should you do about unemployment insurance first?

Unemployment insurance is a weekly cash benefit paid by your state to workers who lose their jobs through no fault of their own. It's not welfare and it's not optional, you paid into it through payroll taxes the entire time you worked. File for it.

Washington's maximum weekly benefit is $1,019 as of 2026.¹ Your actual benefit depends on your earnings history, but that's the ceiling. File at esd.wa.gov the same day you receive your notice or the same day your employment ends, whichever comes first. Washington processes claims from the date you file, not the date you were laid off. Every day you wait is a day you're leaving money on the table.

A few things to have ready: your Social Security number, employment history for the past 18 months, your Microsoft separation notice or last day of work date, and a valid ID. Washington uses identity verification as part of the claims process, so have a government-issued ID ready to upload. If your claim is flagged for review, respond to any ESD requests within the window they specify or your claim can be delayed.

One more thing: receiving severance doesn't automatically disqualify you from filing. Washington has specific rules about how severance affects weekly eligibility, the ESD claims process will walk you through it. File first, answer those questions in the system, and let the ESD sort out the math.

What should you do about health insurance?

COBRA is a federal program that lets you keep your employer-sponsored health plan after you leave. You pay the full premium, which includes what Microsoft was paying on your behalf, plus a 2% administrative fee. The average individual COBRA premium in 2026 runs about $703 per month.² That's real money, but COBRA has one big advantage: you keep the exact same plan, same network, same doctors, with no interruption in coverage.

You have 60 days from your qualifying event (your last day of coverage) or from the date you receive your COBRA notice to elect coverage, whichever is later.³ COBRA is retroactive, if you elect it at day 59 and had a medical event on day 30, COBRA covers it as long as you pay the back premiums. That's a meaningful protection if you're healthy now but want a safety net.

Losing employer coverage also triggers a 60-day Special Enrollment Period on the Marketplace (healthcare.gov).⁴ Marketplace plans may cost significantly less than COBRA depending on your projected income for the rest of 2026. If your income drops substantially after the layoff, you may qualify for subsidies that bring the monthly cost well below $703.

Don't just pick COBRA by default. Take a few hours this week to get a Marketplace quote at healthcare.gov and compare it against your COBRA premium. The 60-day window gives you time to do this right.

Should you sign the severance agreement right away?

No. Read it first.

Severance agreements almost always include a release of legal claims, meaning you give up the right to sue Microsoft in exchange for the payment. That's a significant trade. Federal law gives you time to think about it.

If you're 40 or older, the Older Workers Benefit Protection Act (OWBPA) requires Microsoft to give you at least 21 days to review an individual severance agreement before signing.⁵ Because this is a group layoff affecting multiple employees, that window extends to 45 days.⁶ The 45 days starts from the date you receive the written agreement and the required OWBPA disclosures (a list of the job titles and ages of everyone in the layoff group). If Microsoft doesn't provide those disclosures, the waiver may not be enforceable.

Even after you sign, you have 7 days to revoke your signature.⁷ The agreement can't be enforced until that 7-day window closes.

If you're under 40, those specific timeframes don't apply, but you still have every right to take time to read the document and ask questions. A few things to look for: the payment amount and timing, whether Microsoft is paying your COBRA premiums for any period, any non-compete or non-solicitation clauses, and what happens to your unvested equity. You can also ask whether any terms are negotiable. Microsoft may say no, but asking costs nothing.

Check out our free checklist for a complete rundown of what to look for in any severance agreement.

What about equity and stock options?

Microsoft is a publicly traded company, so equity is a real factor for many employees. The rules depend on what type of equity you hold.

RSUs (Restricted Stock Units): Unvested RSUs typically forfeit on your last day. Any RSUs that vested before your termination date are already yours, check your E*Trade or Fidelity account to confirm the shares are settled and plan your tax timing accordingly. RSU income is taxed as ordinary income in the year the shares vest, so if RSUs vested in 2026, that income goes on your 2026 return.

ISOs (Incentive Stock Options): If you hold Incentive Stock Options, the 90-day clock starts on your last day of employment. You must exercise ISOs within 90 days of termination to keep the favorable ISO tax treatment under IRC Section 422.⁸ After that window, any unexercised ISOs automatically convert to non-qualified stock options (NQSOs) and the spread at exercise gets taxed as ordinary income rather than potentially qualifying for long-term capital gains rates. For employees with a meaningful number of options, that difference can be tens of thousands of dollars. Run the math before day 90.

Also worth knowing: exercising ISOs can trigger the Alternative Minimum Tax (AMT), especially if Microsoft's stock has appreciated significantly above your strike price. Talk to a CPA before you exercise a large ISO position.

What about taxes on your severance?

Severance is wages. The IRS treats it as supplemental wages and withholds federal income tax at a flat 22% on amounts up to $1 million.⁹ If your marginal rate is higher than 22% (which it likely is for most Microsoft employees), you may owe more at tax time than what was withheld.

The Q2 2026 estimated tax payment was due June 15, 2026.¹⁰ If you received severance before that date and your withholding came up short, you may already owe a Q2 payment. The Q3 estimated payment is due September 15, 2026.¹¹ If you receive a large severance payout in the third quarter, consider making a Q3 estimated payment to avoid an underpayment penalty at year-end.

Washington state has no income tax, so your severance tax exposure here is federal only. Still, do the math. Severance plus any vested equity income can push your total 2026 income into a higher bracket, and the 22% withholding may not cover the full bill.

What should you do with your 401(k)?

When you leave Microsoft, you have a few options for your 401(k) balance: leave it in the Microsoft plan if the plan allows it, roll it into an IRA or new employer plan, or take a cash distribution.

Don't take the cash distribution unless you have no other choice. Distributions are taxable as ordinary income and subject to a 10% early withdrawal penalty if you're under 59.5 years old.

A direct rollover is the cleanest move. The plan administrator transfers your balance directly to an IRA, no taxes are withheld, and nothing passes through your hands.

If you take an indirect rollover, you have 60 days from the date of distribution to deposit the full amount into an IRA or qualified plan.¹² The plan will automatically withhold 20% for federal taxes, so you'll need to cover that amount out of pocket and reclaim it when you file your return. Miss the 60-day window and the distribution becomes taxable income.

Deadlines and rules described here reflect federal law and general state guidelines as of the article date.

The Decision Calendar

The deadlines above apply whether or not you are tracking them. The Decision Calendar from Layoff HQ is not just a reminder tool. Based on your last day worked, your state, your age, and whether you have equity, it calculates: the COBRA vs. Marketplace cost comparison for your income level, your severance tax exposure and estimated Q2 or Q3 payment due, your equity exercise costs and the tax difference between acting before and after key deadlines, and your financial runway. Then it tracks every deadline on a single personalized calendar and sends SMS and email reminders before each one closes. One-time purchase. No subscription. 14-day money-back guarantee.

Build your free Decision Calendar or see pricing for the full personalized version.