The Program
Xero introduced an "Opt Out Program" offering immediate severance to employees rated "below expectation" or "moderate" for two consecutive reviews. The alternative: a 30-day performance improvement plan with potential termination afterward.
The company ranks its 5,186 employees across five tiers: exceptional, strong, good, moderate, and below expectation. Anyone in the bottom tier gets the offer. So does anyone rated moderate twice in a row.
CEO Sukhinder Singh Cassidy announced the program via Slack, calling it a way to "raise the bar on customer impact" as the company adapts to AI competition.
The Context
Xero's share price dropped from $155 to $93 over 18 months, a 40% decline. The company's market cap sits at $19.6 billion, down from recent highs. Revenue hit $2.8 billion ARR in 2026, up from $1.7 billion in 2024, but growth hasn't translated to stock performance.
The CEO recently sold $2 million in stock, triggering another price drop. Meanwhile, Xero is working on a new executive compensation structure after existing equity packages went underwater.
What This Means
Paying people to leave instead of managing them out is expensive short-term, cheap long-term. Severance costs money upfront. PIPs cost management time, create legal exposure, and drag down team morale for months.
For sales teams, this matters: underperformers in quota-carrying roles affect territory coverage, pipeline health, and team dynamics. A clean exit program removes blockers faster than traditional performance management.
Typical severance in ANZ tech: 2-4 weeks per year of service, sometimes capped at 12-16 weeks. Xero has not disclosed specific terms, but voluntary programs usually pay slightly above statutory minimums to encourage uptake.
The timing is notable. When exec comp is underwater and shares are down 40%, offering severance packages to rank-and-file employees signals either confidence in the business model or pressure to cut costs. Probably both.
Xero competes with MYOB, Intuit, and Sage in ANZ's cloud accounting market. The company dominates the SMB segment but faces margin pressure as AI tools commoditise basic accounting workflows. Tightening performance standards now positions them for whatever comes next.