US software giant Microsoft has dropped its attempt to reclaim excess severance payments it mistakenly gave to 25 redundant employees. John Stokdyk reports.

Last month, for the first time in its history, Microsoft announced it would be making job cuts – 1,400 immediately and 3,600 to follow in the next 18 months. The situation became more difficult for Microsoft when a letter from the company’s payroll department asking an employee for some of their severance pay back was published on the TechCrunch website.

“An inadvertent error occurred that resulted in an overpayment of severance pay by Microsoft,” it explained. “We ask that you repay the overpayment and apologise for any inconvenience to you.”

In response to queries from HRZone.co.uk, the company said 25 former employees had been informed about their severance overpayments. “This was a mistake on our part,” Microsoft said. “We should have handled this situation in a more thoughtful manner. We are reaching out to those impacted to relay that we will not seek any payment from those individuals.”

The story has sparked numerous sub-debates across the internet about how Microsoft could have made such a basic error and how it managed the situation. Given that such a small number of employees were affected, it will not cost Microsoft a lot to get out of the hole it has dug. While the company acted quickly to lessen the reputational damage, it will still have to feel the PR pain for a few weeks to come.

If you have been involved in a similar situation, how did you resolve it, and what would you do in these circumstances?