Mass redundancies | Spotify axes 1500 jobs in third wave of cuts this year

Spotify axes 1500 jobs in third wave of cuts this year

Music streaming giant Spotify is laying off around 1,500 employees, or 17% of its workforce, to bring down costs, the company has announced.

As reported by Reuters, it is the third wave of job cuts at the company this year, after letting 600 of its staff go in January, and 200 more in June.

In a letter to employees, Spotify CEO Daniel Ek said the company hired more in 2020 and 2021 due to the lower cost of capital and while its output has increased, much of it was linked to having more resources.

Spotify will incur about 130-145 million Euros (£111-124million) in charges in the fourth quarter due to the layoffs, the company said, adding that majority of the cash component of the charges will be recorded in the first and second fiscal quarters of 2024.

Spotify invested more than a billion dollars to build up its podcast business, signed up celebrities such as Kim Kardashian, Prince Harry and Meghan Markle, and expanded its market presence in most countries in the world in its quest to reach a billion users by 2030.

In the third quarter the company swung to a profit, aided by price hikes in its streaming services and growth in subscribers in all regions, and the company forecast that its number of monthly listeners would reach 601 million in the holiday quarter.

Ek told Reuters at that time the company was still focusing on efficiencies to get more out of each dollar.

On Monday, he said a reduction of this size will feel large given the recent positive earnings report and its performance.

"By most metrics, we were more productive but less efficient. We need to be both," Ek said.

The company will start informing affected employees on Monday. Employees will get about five months of severance pay, vacation pay, and healthcare coverage for the severance period.

"We debated making smaller reductions throughout 2024 and 2025," Ek said. "Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives."

HR’s role in the complex emotions of redundancy

Redundancy is never easy - anyone who has been through it can attest to that. There are so many feelings that go alongside the redundancy process, from anger and fear to nervousness and anxiety, and HR's role in this complex emotional world is a difficult one.

If you're in an HR team, whether you have only a few people to help navigate the redundancy process, or thousands, there will be so many different emotions.

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Those HR managers will also be wondering what the future holds - but having to answer countless questions as well as navigate the behaviour of staff who are distracted by their concerns and ever-changing news reports.

It's not the first time this year that job cuts have hit Spotify, so staff morale may well already have been low.

Accepting emotions will be strong

Jim Moore, employee relations expert at HR consultants Hamilton Nash, said: “Workers discovering that their employer is going into administration will go through a range of strong emotions that have to be handled carefully. Affected workers will be especially sensitive at the moment, with worries over finding another job heightened with the cost-of-living crisis and interest rates at a 15-year high. The initial shock of the news is swiftly replaced by fear about their financial security and a combination of anger and resentment at bosses. Honest and transparent communication from leaders is essential – both with workers and unions – to explain what is happening and what staff should expect in terms of their future and their pay.

Know your redundancy policy

If they are reading about the company day-to-day, they will be coming to you to ask about redundancy policy. While you might not be able to have one-on-ones with every member of the entire company, you need to be clear on where managers can find policy and what they might be able to pass onto staff.

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On its website, the Chartered Management Institute (CMI) offers insight from Paul Holcroft, Associate Director at Croner, who advises firms on their HR policies – part of which covers redundancy packages. He said that honesty and clarity are the components of successful support.

“Being made redundant can be an incredibly distressing time, so it is essential that employers maintain regular dialogue with affected staff,” Holcroft said. “Given the complexity of a redundancy procedure, employers should provide individuals with a clear explanation of their rights and a timeframe for when decisions will be made. This reduces any unnecessary stress and ill feeling among the workforce. Employees with a minimum of two years’ service are eligible for a reasonable amount of time off to look for new work or to arrange training for future employment.”

Find support to help those you need to help

"There are also organisations that provide outplacement support services, and employers can use these to help impacted workers feel more confident reentering the job market," adds Jim Moore. “If the employer is in liquidation, employees will be dismissed immediately and there may be a risk that they won't get their redundancy payments. The government has a Redundancy Payment Service to help workers recover their redundancy pay and any loss of notice pay.”

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