Big Tech Invests Heavily in Layoffs

In the earnings reports, the four big tech firms disclosed what they’ll pay for the mass redundancies.

Big Tech, which recently laid off thousands of employees, has taken a bold stance on severance packages and trimmed their excessive spending. In a departure from the norm—as revealed in the latest earnings call—the tech giants are breaking the mould with a unique approach and owning up to the hefty sums they’ll be handing out to impacted workers. 

In the last few months, Meta, Google, Microsoft and Amazon have collectively cut 50,000 jobs to convince Wall Street that they were heading into a “year of efficiency”, as Meta chief executive Mark Zuckerberg described it. Following a decade of extravagance, Meta decided to let go of 11,000 workers and get rid of its office and data centres. 

In the earnings report released earlier this week, the Facebook parent stated that its current headcount was 86,482, an increase of 20% year-over-year. The count includes the 11,000 employees impacted by the layoffs. The company will spend $4.20 billion restructuring charge—including costs for severance for laid-off employees—for the fourth quarter. Further, a $1 billion expenditure related to consolidating their office facilities footprint in 2023 is also in the pipeline. 

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Even though it seems that Meta has been looking out for its employees, in December 2022, some ex-employees from an apprenticeship programme told CNBC that they were receiving substandard severance packages compared to those of other recently laid-off employees. Instead of Zuckerberg’s promised 16 weeks, they only received eight weeks of base pay, among other material differences.

In Layoffs We Trust  

As per Brian Olsavsky, Amazon’s CFO, $640 million was spent on severance packages in Q4 of 2022 and an additional $720 million on abandoning real estate. The company announced plans to eliminate 18,000 roles in January and did not share further details on charges it might incur in the current quarter and beyond. In a recent statement, Amazon mentioned that its progress in cost reduction has been encouraging and they are optimistic about long-term opportunities. 

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Human resources head Beth Galetti had earlier said that Amazon will offer a separation payment, health benefits as applicable by country and job placement but it is unclear if that includes any provisions for the employees to accelerate the vesting of stock compensation. This is a subject of concern for Amazon employees, as the company’s compensation has historically been weighed heavily to stock.

Google coined the term “Golden 12K” for the severance pay offered to the laid off employees. A Securities and Exchange Commission filing from Alphabet disclosed the memo without specifying the cost of the layoffs. In the earnings call, the company announced that they expect to incur employee severance and related charges of $1.9 billion to $2.3 billion, the majority of which will be recognised in the first quarter of 2023. Hence, for each employee, the severance cost will work out to $191,000. Alphabet faces a further $0.5 billion in costs relating to office space reduction in the current quarter. Immediately following the report, shares of Google’s parent company, ‘Alphabet’, dropped around 4% in after-hours trading Thursday. 

severance packages big tech

Hiring Strategically

Google has also subjected its senior executives to pay cuts as part of the company’s cost-cutting measures. As quoted by Business Insider, Pichai said, “All roles above the senior vice president level will witness a very significant reduction in their annual bonus. For senior roles, the compensation is linked to company performance”. It is not clear what Pichai’s own pay cut is going to be. However, despite the cuts, Ruth Porat, Alphabet Chief Financial Officer, said that the tech giant would continue “hiring in priority areas, focusing on top engineering and technical talent globally”.

Lastly, the Redmond-based software giant Microsoft’s axing of 10,000 workers has resulted in it incurring a $1.2 billion charge in the concluding three months of 2022, $800 million of which was from severance pay. Bearing likeness with Google, Microsoft has also planned to invest capital and hire talent for “key strategic areas”. The technology company went through two rounds of layoffs in 2022 and had announced an “above market pay” as severance for its laid-off employees. Microsoft is also on track to get rid of its humongous office space of around 1.7 million square feet in the next few years. 

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by Vijayalakshmi Anandan

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Tasmia Ansari
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