Tech companies worldwide are scrambling to reduce their workforces in an attempt to conserve money and calm investor concerns, having gone on a hiring binge following the lockdown. To set the scene, we will talk about the different reasons why companies lay off employees, not only in the software industry but all over the corporate world.
633 IT organizations laid off 185673 employees in 2023, according to the data on layoffs. By contrast, the same source claims that 1056 tech companies fired 164511 workers in 2022. Large-scale layoffs have been announced in 2023 by tech companies like Google, Microsoft, Amazon, Meta, IBM, and so on. Two months after announcing plans to lay off 18,000 workers and only one week after Meta reduced its global staff by firing 10,000 workers, or around 13% of its foreign workforce, Amazon chose to remove 9000 jobs on March 20, 2023. These companies most frequently claim overhiring and a lack of revenue as the causes of layoffs.
X formerly known as Twitter, quietly let off 10% of its employees worldwide in February of the year 2023, carrying on the swift downsizing trend that started in the wake of Elon Musk's controversial takeover in October 2022. In 2023, medium-sized and small tech companies have also started laying off employees, despite the major giants hogging the news. The multiplicity of reasons why firms worldwide undertake layoffs will be briefly discussed in the section that follows.
- Financial crunch (cost cutting): One of the main causes of layoffs may be cost reduction. Reducing expenses can be done for several reasons, such as increasing earnings and satisfying investors, as well as low profitability, business losses, and sluggish productivity. One of the primary costs incurred by organizations is the salary and benefits of their workforce. Therefore, businesses may choose to reduce staff to save money or make up for losses. Additionally, if businesses believe that the economy is not doing well, as it is at the moment, they may choose to fire employees.
- Buyouts and mergers: A merger is the coming together of two businesses or operating units to form a new firm or unit. Similar to this, a buyout occurs when an organization buys a business or operating unit, thereby transferring control and integrating the business into the new enterprise. Layoffs are typical in these circumstances since the newly established firm (or the purchasing company) frequently reorganizes the business by changing departmental assignments, job titles, staffing levels, and other factors. Companies may choose to reduce their staff to achieve this, and then determine how many employees they wish to keep.
- Staff redundancies: These can occur as a result of job title changes, overstaffing, outsourcing, etc., and are another major cause of layoffs. Automation also contributes to job redundancies since it allows businesses to boost productivity at much lower prices by replacing workers with machines. Many jobs have become obsolete due to automation, which frequently results in widespread layoffs. Because job positions are ever-changing, many skills that are in demand now may become outdated tomorrow. Because the services of additional employees are no longer needed, either temporarily or permanently, overstaffing typically results in job cutbacks.
- Company relocation: As a result of globalization, a lot of businesses frequently move to new nations or areas to save expenses and obtain inexpensive labor. Additionally, if they can afford it, businesses may relocate their employees, but only in the case of critical positions. Since hiring locals is frequently beneficial and economically possible, businesses typically recruit locals when they migrate.
- Outsourcing: One of the main causes of employment cuts is outsourcing. For many businesses, hiring full-time staff members is costly, yet this may not always be the case. On the other hand, multinational firms find great financial success when they outsource work to nations or areas where currencies are weaker. Employers frequently use agencies with payroll-based workers to get low-cost labor.
- Corporate greed: To maximize value from fewer people, many corporations engage in unethical activities such as grossly underpaying young interns, overworking employees by extracting free labor, and purposefully understaffing departments. When three employees can accomplish the same task for no additional charge, why hire five people to do it? Why not take advantage of interns by getting around regulations against loose labor? Entities frequently terminate current workers or halt hiring to acknowledge this. Fifty percent of employees believe that their organizations are understaffed and that the lack of labor is causing employee burnout, according to a CNBC survey.
The subject of what employees may do to prevent losing their jobs now that we have covered the various causes of layoffs comes up. Along with networking, upskilling can help employees survive in an unpredictable, volatile, and ambiguous economy. That being considered, given the current global challenges, it is challenging to make firm predictions about how things will turn out. However, given that there is no indication that the worldwide headwinds will let up, it is certain that layoffs will keep occurring.
