- Meta is expected to carry out large scale cuts during layoffs season.
- Multiple factors are at play in the layoffs, including budget planning for next year and economic conditions.
- According to industry experts, the next few weeks will be crucial as holiday layoffs can have a negative impact on morale and future hiring.
Layoff season is upon us.
Meta is reportedly planning widespread layoffs.Lyft reduces Nearly 700 employees. Fintech giant Stripe 14% of its workforce were laid off. Those are just headlines in the last week — and it’s likely only the beginning, industry experts say.
Technology earnings are decliningAt the same time, companies begin to plan for the next year. And with economic forecasts looking dire, tech firms are starting to tighten the belt — starting with cutting their workforces to shave salary costs.
In other words, tech workers may lose thousands of jobs over the next few weeks.
How did we get here?
Big Tech companies posted less-than-stellar results over the past weeks. But they also showed warning signs about what lies ahead for the months. The looming threat of a recession was causing customers to scale back spending, companies said — with few signs of a rebound on the horizon.
This means that companies will be trying to cut costs in the coming weeks and months, according to Dan Wang, associate professor at Columbia Business School.
Wang said to Insider, “When they cut costs the first thing that goes is usually labor costs and advertising and marketing.” “So, when it comes down to forecasting their numbers, it will depend on what they have seen the trend of advertising spending on platforms. If they don’t see the trend, they will adjust their workforces to meet those expectations.
The pandemic has sparked a surge in tech companies’ growth. He said that the current situation is a correction. The tech industry has begun to adjust to a time when people don’t need to be glued to their phones at home.
And even though in many cases layoffs began earlier this year — both at startups and big tech firms — sometimes, they didn’t go far enough, Menlo Ventures partner Matt Murphy Insider previously.
Murphy explained that “it always happens in cycles such as this that sometimes companies don’t do layoffs sufficiently, but rather slow down with hiring and hope normal churn might rightsize the employees.” “Quarterly 3 was much harder than Q2, and it was clear that there were many headwinds. Startups realized they could not grow from this situation with the staff they had, so they had to lay people off.
What’s the latest?
These economic challenges can be a challenge for some businesses at the same moment they plan for next year.
Amazon, Meta, Google, and others have fiscal years that run from the end of 2022 to the beginning of 2023. They may be looking to get costs off their balance sheets now — before their fiscal years close. If an employee is laid off and offered six weeks of severance now, it will reduce the cost for the first quarter. Even if workers get a longer severance such as three months, the salaries would still be in the books by the end of the first trimester.
While budget-planning doesn’t apply to every company — Microsoft, for example, Just completed layoffs and its fiscal year ends in June — there is an element of planning ahead at play, said J.P. Gownder, vice president and principal analyst at Forrester, a market research company.
Insider reported that “That’s kind of unfortunate because it means a certain amount of people are going to lose jobs before the holidays, and before the turning of the year.”
Gownder stated that some companies might be following the lead in other ways. They may assess economic conditions partly based on what others are doing.
“Watching firms that are similar to yours in tech could make you think, ‘Ah! this is the time’,” he stated. There is a lot of group-think at Silicon Valley.
What’s next?
These are the most important weeks with Thanksgiving right around the corner. That’s because companies may not want to cut jobs during the holidays — it could tank company morale, paralyze the employees who did keep their jobs, and affect future hiring, Gownder said.
He said, “The best talent won’t work for companies that kinda indiscriminately without any empathy lay people off at first signs of trouble.”
Tech firms that want to make layoffs should take the next two week off. This is because they don’t want to risk keeping these costs on their profit statements heading into the next quarter and adding on secondary effects.
Some planning could mitigate that — severance would help soften the blow, as would helping laid-off workers get new jobs, like Airbnb did back in 2020 — but the timing still comes down to how individual companies are going to make their planning decisions.
Gownder stated, “There is a process here, and unfortunately I don’t understand that that process is very focused on not disappointing people during Christmas.”
