All About the Layoffs at Tech giants and Start-ups

The hottest topic in the tech market today is the sudden yet regular happening of layoffs at tech giants and start-ups. Yes. Not only these tech giants but also start-ups are doing the biggest layoff of all time. 

One of the most troubled sectors of the economy is tech. While the industry is growing in some areas, it is also drastically shrinking in many. Legamart brings you some detailed insight into the ongoing digital layoffs.

Introduction

These layoffs at tech giants and start-ups are affecting the world’s economy. Several tech companies, including Microsoft, Twitter, and Meta, had already been hit by this wave of digital layoffs. Alphabet, Google’s parent company, has joined the list of IT behemoths that have implemented layoffs in recent weeks. Because of its tenacious search business, Google has long been a tech holdout. 

Most of these companies have either stopped new hiring or announced significant job cuts to stay afloat and continue on their path to profitability. Google and Meta have announced the most significant layoffs of any Big Tech company, with 10,000 and 11,000 employees, respectively.

What’s exactly happening with these tech companies lately?

Just a few days into January, we are hoping to see a little chance of seeing a shift in layoffs at tech giants and start-ups as well as the labour market because many tech companies have chosen to implement mass layoffs in response to the current macroeconomic situation. 

Tech job cuts made headlines in 2022, and that trend may continue in 2023, with major corporations like Amazon and Salesforce already reducing staff numbers.

The year 2023 started with Amazon announcing 18,000 layoffs and Google announcing 12,000 firings, and the Digital layoffs came thick and fast after that. The parent company of Google, Alphabet Inc., announced that it is cutting 12,000 jobs, or 6% of its workforce, in the most recent layoffs to rock the technology industry.

According to LegaMart analysts who cited data, 210,000 tech workers have been let go this year, with 40% of those layoffs occurring in the fourth quarter. 

According to analysis, there are currently 36% fewer job openings at the average company in its internet and software coverage universe than at the beginning of the year. It signifies the “excess” technology caused during a “period of easy money.” 

Reasons for an increased tech layoff trend

The recent increased layoff trend can be attributed to various factors. Some of them are:

1. Economic downturn. U.S. recession debates have become very common, especially considering the shrinking economic trends, according to the data released by the U.S. Bureau of Economic Analysis. This has led to an uncertain situation, and the fear of recession is looming among all. This trend has further been enhanced due to the government debt ceiling, the pandemic situation, the Ukraine war, and increased interest rates. This means that companies look towards layoffs as a survival method. 
2. Inflation. The inflation rate in 2022 has increased compared to the previously experienced steady inflation in the country. In fact, 2022 saw the highest inflation rate in 40 years, according to the U.S. Bureau of Labor Statistics statistics. While the situation has been a little in control in 2023, there is still a high inflation rate, which has resulted in companies covering their increased expenses through the layoff of employees. 
3. Higher Interest Rates. In 2022, the Federal Reserve raised the interest rates seven times and was expected to raise them further in 2023. This is mainly done to slow economic growth and deter businesses and consumers from spending, ultimately leading to a reduction in demand and a decrease in prices. These higher interest rates end up affecting venture capitalists (VCs) and other startup funding. 
4. Investor Pressure. With slower revenues, investors expect the companies to decrease their expenses. For instance, it happened when TCI Fund Management called on Alphabet to reduce its headcount, leading to increased profitability. The same was the case with Microsoft and Meta. 
5. Silicon Valley Bank Collapse. The tech industry faced a significant impact in March 2023 due to the collapse of the Silicon Valley Bank. This especially impacted the tech industry, considering that Silicon Valley Bank had provided funds to various tech startups when other banks were not willing to take higher risks. However, the collapse of the bank has led to the companies seeking layoffs. 

How covid has contributed to the happening of these layoffs at tech giants and start-ups?

Following the Covid-19 pandemic, tech companies hired many people in anticipation of rapid business growth and expansion into new markets. Due to the sudden increase in demand, some of these resources were hired at a higher price. 

These businesses are reducing their costs by terminating underperforming projects and firing the excess and expensive resources they hired to speed up growth as demand is returning to pre-Covid levels, the debt bubble is almost about to burst, and they fear a recession. For most of these large tech companies, maintaining their market position and expanding their customer base through sufficient profits has become more important.

However, due to a cash shortage and a lack of investments, many start-ups find it difficult to survive in a volatile environment and are doing digital layoffs. Even start-up companies had to close their doors because they could not raise funds to operate. For start-ups, 2022 has not been a good year; they were experiencing a severe funding winter. Many investors were either leaving the market or requesting that the firms find any way possible to reduce costs.

Impact of the Russia-Ukraine war on the digital layoffs

The world has been impacted by a series of negative events, such as the pandemic, the Russia-Ukraine war, and inflation. These events ultimately contribute to the layoffs at tech giants and start-ups. To overcome these ups and downs, the world is currently hitting the reset button. This process includes temporary tremors. The current trends, such as hiring freezes and layoffs, may not be sustainable in the long run. 

Amid these unforeseeable circumstances, we must find our rock and remain optimistic about the future while taking the necessary precautions to weather the storm. While looking for greener pastures, businesses must focus on solidifying their best-performing products and services and providing the best customer service.

Major digital layoffs in the tech industry so far

Here are some of the major layoffs at the tech giants and start-ups in the technology industry so far:

Alphabet: 12000 jobs cut

Alphabet-owned Google announced Friday that it would lay off 12,000 employees. 

Google CEO Sundar Pichai announced in an email to employees that the company would immediately begin layoffs in the United States. However, the process “will take longer in other countries due to local laws and practices,” he said. CNBC reported in November that Google employees feared layoffs as competitors cut staff and the company’s performance rating system changed. 

Alphabet had largely avoided layoffs until January, when it laid off approximately 240 workers from Verily, its health sciences division.

Microsoft is laying off 10,000 employees

Microsoft is laying off 10,000 employees through March 31 as the company prepares for slower revenue growth. In addition, the company is taking a $1.2 billion charge. 

“I’m confident that Microsoft will emerge stronger and more competitive,” said CEO Satya Nadella in a memo to employees on the company website on Wednesday. Some employees will learn this week whether they will be laid off, he wrote. 

Amazon has cut 18,000 jobs

Amazon CEO Andy Jassy announced earlier this month that the company planned to lay off more than 18,000 employees, primarily in its human resources and retail divisions. It came after Amazon announced in November that it was looking to reduce staff, including in its device and recruiting divisions.

CNBC reported that the company planned to lay off 10,000 workers. During the Covid-19 pandemic, Amazon went on a hiring binge. By the end of 2021, the company’s global workforce will have grown to more than 1.6 million, up from 798,000 in the fourth quarter of 2019. 

500 jobs have been cut at Crypto.com

On January 13, Crypto.com announced plans to lay off 20% of its workforce. According to PitchBook data, the company had 2,450 employees, implying that approximately 490 were laid off. 

In a blog post, CEO Kris Marszalek stated that the crypto exchange grew “ambitiously” but could not weather the collapse of Sam Bankman-crypto Fried’s empire FTX without the additional cuts.

“All affected personnel have already been notified,” Marszalek wrote on Facebook. 

Meta: 11,000 jobs cut

In November, Facebook parent Meta announced its most significant round of layoffs. The company intends to lay off 13% of its workforce, or more than 11,000 people. 

Meta’s disappointing fourth-quarter 2022 guidance wiped out one-fourth of the company’s market cap, sending the stock to its lowest level since 2016. 

The cuts come after the tech behemoth increased its headcount by roughly 60% during the pandemic. Competition from rivals such as TikTok, a general slowdown in online ad spending, and challenges from Apple’s iOS changes have all hurt the business.

Twitter has cut 3,700 jobs

Elon Musk, who purchased Twitter for $44 billion in late October, laid off approximately 3,700 employees, according to internal communications obtained by CNBC. That’s roughly half of the staff. Significantly more employees have left after Musk changed some policies regarding working from home and wrote that he expected all employees to commit to a “hardcore” work environment. 

Musk stated in a tweet on November 4 that the company had “no choice” but to lay off employees because it was losing $4 million daily.

These were some of the major layoffs at the tech giants and start-ups that have taken place lately. 

Other 2023 tech layoffs

Some other companies that decided to layoff their employees are:

• SoFi Technologies. The company announced the layoff of 5% of its employees on January 31, 2023. 
• Pinterest. The first job-cutting began in December 2022, followed by a second round on February 2, 2023. 
• Dell. The companies laid off 5% of their employees worldwide, impacting almost 6650 people. 
• Zoom. Cut 15% of their staff, or about 1300 people, through an announcement made on February 7, 2023. 
• Yahoo. Impacted 1600 employees, or 20% of their staff, in the ad tech business. 
• Evernote. The company laid off 129 employees on February 17, 2023. 
• Alerzo. The company laid off 15% of their full-time workforce on March 6, 2023. 
• Livespace. Laid off at least 2% of their workforce on March 20, 2023. 
• Accenture. Announced its plans to cut 19000 jobs on March 23, 2023. 
• Disney. Announced three rounds of layoffs, beginning March, with an estimated number of layoffs of 7000 employees. 
• Unacademy. Announced the layoff of 6% of its workforce. The company had previously laid off 200 employees in the US back in November 2022. 
• Netflix. Confirmed “handful of layoffs” on March 31, 2023, including the layoff of two longtime executives. 

Conclusion

The doctrine of layoff comes into work as a result of recession and companies losing income, resulting in them shedding expenditure, often in the form of firing employees. Although generally, there are various reasons and explanations, still not in all cases are these enterprises allowed to disown the employees who relied upon them for their income and security. The laws regarding layoffs can be complex and vary from place to place, but with the assistance from legal experts available at Legamart, you can overcome the challenges thrown at you by your employer. 

Frequently Asked Questions (FAQs)

When are tech layoffs expected to stop?

There is expected to be a decrease in the number of tech layoffs with an increase in the performance of the global economy. This would, however, require some more rounds of layoffs in the making. In addition, startups which have raised their capital at inflated valuations in 2021 are expected to conduct layoffs in 2023. 

What are the types of jobs affected by tech layoffs?

Tech layoffs have impacted many departments in many countries. For instance, Google cut jobs in the recruiting, sales, engineering, and product teams. Amazon cut jobs in the AWS cloud unit. Twitch cut jobs in the advertising department. Meta cut jobs in the recruiting department.