Say it's a layoff without saying it’s a layoff

Better.com can’t seem to catch a break. The US-based home mortgaging company first made headlines last year in December when CEO Vishal Garg casually fired over 900 employees over a Zoom call. In the call, Garg said, the management “probably pissed away USD 200 million.” The company fired employees mainly from India and the US. The firing incident happened immediately after the company raised USD 750 million from Softbank and Aurora Acquisition Corporation.

In March, the company laid off another 4,000 employees without prior warning. However, this time Better.com offered the staff an option to leave under the ‘voluntary separation agreement’ to soften the blow. Ninety percent of the company’s 2,100 employees in India submitted their resignations. By May, Better.com had accepted 920 resignations. While a ‘voluntary separation’ means employees ‘can leave if they wish,’ in Better.com’s case, it seemed like a pretext to let go of the employees.

Number of tech layoffs from the pandemic until 2021 (industry-wise), Source: Statista

Wave of layoffs

The tech industry is having a ‘morning after’ moment after the pandemic triggered a digital transformation, leading to soaring valuations and capital investments in the tech space. Hiring freezes and layoffs are on the rise this year. According to a Crunchbase report, the US tech industry had laid off more than 17,000 employees by June with startups bearing the brunt. Companies like Robinhood, which were on a roll last year, fired 9 per cent of its workforce in April. Among the big tech companies, Netflix laid off 150 employees, including a lot of seniors.

In the face of a looming recession, the companies seem to have latched onto the trend of ‘soft layoffs.’ The employers have weaponised soft layoffs to shed employees. 

The concept of soft layoffs isn’t entirely new. Soft layoffs come in different shapes and sizes including short-term contracts, ‘benching’ or constructive dismissals. Soft layoffs benefit companies in a couple of ways - no severance packages and less PR nightmares.

Work from office or go home

The companies are now using the return-to-work excuse to let go of employees. In March, Indian edtech company Whitehat Jr asked all their employees to start working from the office in a month. By May, more than 800 employees had resigned.

Later, Whitehat Jr. released a statement: “As part of our back-to-work drive, most of our Sales and Support employees have been asked to report to Gurgaon and Mumbai offices from April 18. We have made exceptions for medical and personal exigencies and have offered relocation assistance as required. Our teachers will continue to work from home.” 

Since February, India’s edtech sector has been rife with layoffs. Lido Learning, an edtech firm with 1,000 to 2,000 employees, had shut down. Vedantu has laid off 624 employees and Unacademy fired 600 employees in April. The slowdown in the edtech space has been attributed to the consolidation of the edtech sector and the reopening of schools. 

In the first week of June, Tesla head Elon Musk demanded employees to return to offices or face termination. In the mail, Musk said employees are required to “spend a minimum of 40 hours in the office per week.”

In another missive, Musk said he was stressed about the imminent recession. The mail said he wanted to cut 10 percent of Tesla’s workforce because he had ‘a bad feeling about the economy.’ Musk said the certain offices of the automaker were ‘overstaffed’ and that he also intended to ‘pause all hiring worldwide.’ In true Musk fashion, he later retracted the statement and clarified that Tesla would continue to hire till the end of the current year but the number of salaried employees would stay the same. 

In an interview with Reuters, economics professor at Stanford University, Nicholas Bloom, said 60 percent of Tesla employees would return full-time to office and 10 percent would quit while 30 percent would decide to look for a different job.

Australian software company Atlassian’s co-founder and CEO Scott Farquhar expressed his disagreement with Musk’s hardball approach. Farquhar spoke about Atlassian’s flexible policies and asked if any Tesla employees were interested to work with him. Regardless of how ‘bad’ the reaction online may seem, Musk’s move will have the desired effect. As uncertainty in the current economy looms large, companies will exploit soft layoffs to downsize with minimum PR damage. And while layoffs may be an unfortunate and sometimes unavoidable outcome of an economic downturn, perhaps there are still lessons to be learned on how to treat employees fairly even during rough times.