In this article, we discuss the various reasons for layoffs as well as the job cuts that have occurred in the tech industry in 2023.
The year 2023 has spelt doom for employees in the tech sector in the form of mass layoffs as the threat of a global recession looms in the background. After embarking on a hiring spree post-lockdown, tech organisations around the globe are scuttling to downsize their workforce in order to save costs and allay investor fears. To provide context, we will be discussing the various reasons for layoffs not just in the tech sector, but also across the corporate world.
According to the numbers on Layoffs.fyi, 185673 employees have been laid off in 2023 by 633 tech companies. In comparison, 1056 tech entities reportedly laid off 164511 employees in 2022, as per the same source. Tech giants like Google, Microsoft, Amazon, Meta, IBM, etc., have announced mass layoffs this year. On March 20th, 2023, Amazon decided to cut 9000 jobs, two months after it revealed plans to lay off 18000 employees, a week after Meta downsized its global workforce by firing 10000 employees – approximately 13% of its international manpower. The most cited reasons for layoffs cited by these companies are over-hiring and revenue crunch.
In February of this year, Twitter stealthily made 10% of its global workforce redundant, continuing the previous year’s trend of rapid downsizing that commenced after Elon Musk’s noisy takeover in October 2022. While the tech behemoths have been making headlines this year, medium and small tech companies have been cutting their workforce as well. The following section will briefly shed light on the plethora of reasons for layoffs in corporations across the globe.
Reasons for layoffs
• Financial crunch (cost cutting): Cost reduction is perhaps one of the biggest reasons for layoffs. The reasons for cost-cutting could vary from low profits, business losses, and slow production, to augmenting profits and satisfying investors. Employee salaries and perks constitute one of the main expenditures for organisations. Therefore, to save money or offset losses, companies might decide to cut their workforce. Also, companies might decide to lay off workers if the economic conditions are perceived to be unfavourable – something that we are currently witnessing.
• Mergers and buyouts: A merger happens when one company/operating unit merges with another organization/operating unit to become a new entity/unit. In the same vein, a buyout happens when a company/operating unit is purchased by another organisation, basically becoming a part of the new company through a transfer of ownership. During such situations, layoffs are common as the newly formed entity (or the company that makes the purchase) often restructures the company by altering job positions, staff requirements, job titles, departmental changes, etc. To accomplish this, companies might trim their workforce and accordingly decide the number of employees they want to retain.
• Employee redundancies: Another primary reason for layoffs is that staff redundancies can happen due to changes in job titles, overstaffing, outsourcing, etc. Job redundancies also happen due to automation, as machines replace humans and help companies increase output at significantly lower costs. Automation has been responsible for making many jobs expendable, often leading to mass layoffs. Job roles are dynamic and many skills which are in demand can quickly become obsolete. Overstaffing mostly results in job cuts as the services of extra employees are no longer required either temporarily or permanently.
• Company relocation: Due to globalization, many companies often relocate to different regions or countries to save on costs and extract cheap labour. Also, companies can mobilize their workforce to a new location if they can afford the expenses, but this happens only for essential positions. When organisations relocate, they generally hire local people as it’s often economically feasible and profitable.
• Outsourcing: This is one of the major reasons for job cuts. Hiring full-time employees is often expensive for many companies, though that might not always be the case. On the other hand, outsourcing jobs to other countries or regions with weaker currencies is highly profitable for multinational corporations. Organisations often hire agencies that have employees on their payroll to provide cheap labour.
• Corporate greed: Many companies resort to unethical practices like overworking employees by extracting free labour, exploiting loose labour laws by severely underpaying young interns, and purposely understaffing departments so that they can extract maximum value from fewer employees. Why hire 5 people to do a job when you can squeeze 3 employees to do the same at no extra cost? Or why not exploit interns by circumventing loose labour laws? To realize this, entities often fire existing employees or freeze hiring. According to a survey by CNBC, 50% of workers say that their companies are understaffed and that labour shortage is leading to employee burnout.
Now that we have discussed the different reasons for layoffs, the next question that arises is what employees can do within their grasp to avoid losing their jobs. Upskilling can help employees survive in an uncertain, volatile, and ambiguous market along with networking. Having said that, it’s difficult to definitively predict how things will pan out amidst the present global headwinds. But what’s certain is that the layoffs will continue to happen as the global headwinds show no sign of subsiding.
Also Read – Google employees pen open letter to Sundar Pichai amid layoffs
