More redundancies | Why are there so many layoffs at big tech companies?

Why are there so many layoffs at big tech companies?

There’s more bad news from the tech industry: Amazon is set to make 18,0000 people - 6% of its global workforce - redundant, while Microsoft is laying off 10,000 employees; just under 5% of its total staff.

Both companies are cutting back, amongst other departments, on HR personnel and the blame has been put squarely on the shoulders of the consumers, whose increasing online purchasing habits over recent years forced a digital recruitment frenzy, and who have now decided to tighten their purses or return to walking into shops.

Changing times

Kevin Poulter, Employment Partner at national law firm Freeths, told HR Grapevine: “Such a reduction in staff may be perceived as a further loss of confidence in the tech sector. Many organisations through the pandemic have adopted competitive recruitment drives in a bid to train and secure the best talent.”

“The ‘uncertain economy’ already cited by Amazon continues to face many businesses and will continue to do so through 2023,” he continues.

“There can be many reasons why redundancies will be considered by a company, e.g. reducing overheads, restructuring or ‘right-sizing’, a change in business direction or the closure of a particular service, location or the company as a whole. Initial reports that its engineering and HR divisions are affected suggests a general trimming of resources rather than a change in focus or cutting of specific projects.”

We know that if companies don’t change focus and move with the times, they lose their relevance. Think Blockbusters Video or Blackberry: refusing to adapt or change focus resulted in decreasing sales and ultimately, their demise. Blackberry users actually said their final goodbyes on January 4, 2022, when the software was decommissioned and from which point Blackberry phones no longer worked.

In an email to all staff explaining the redundancies, Satya Nadella, Microsoft’s CEO, stated: “As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less.”

“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.”

Citing a looming recession and the need to allocate capital and talent to “areas of long-term competitiveness for the company,” Nadella assured soon-to-be-ex employees they would receive a variety of 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.”

Whether a large conglomerate or a small business, redundancies are not taken lightly and having a comprehensive redundancy policy is crucial, especially as we seem to be moving into another period of financial gloom.

Claims and consultations

And it could get worse. On the back of the 2009-10 recession, the number of claims rose annually by 56%, focusing on unfair dismissal, breach of contract and redundancy.

Susan Thompson, Partner and specialist employment lawyer at Simkins LLP, notes: "If Microsoft follows through with its plans to make 10,000 employees redundant, and if there are more than 20 redundancies at any one establishment, it must consult collectively with appropriate representatives of affected employees.”

“Individual consultation is still important, Thompson adds, “if Microsoft wants to avoid claims of unfair dismissal."

Only time will tell if Microsoft’s employees file claims with the tribunal, however one thing is absolutely possible to do right now and that’s to respect the employment laws.

When thinking about making staff cutbacks, Asha Kumar, employment partner at Keystone Law, urges companies to take the time to do it right.

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