5 Important Reasons for Mass Layoffs by Tech Companies

mass layoffs

For a cohort of employees who have never seen a deepening recession, the industry’s recent mass layoffs have been a wake-up call.

Winter layoffs have attracted attention as some tech companies have decided to quickly undertake mass layoffs. Due to the fragility of tech firms, many people’s once-dream professions are becoming nightmares as employees fear for their futures. Layoffs are also happening at an alarming rate, from Twitter to Facebook.

Tech firms have turned to manpower reduction—with mass layoffs—to strengthen their balance sheets.

When global economic headwinds started to gather earlier in the year, the tech sector reacted to fears of an upcoming recession by slowing hiring. The bad news is that, as a result of rising interest rates, the ongoing conflict in Ukraine, high gasoline prices, supply chain issues, and a decline in personal computer sales, the majority of those freezes have since been led by job layoffs.

The Indian tech industry is also struggling due to mass layoffs.

The Indian tech sector is struggling as layoffs continue after big giants like Twitter, Meta, and Apple fired hundreds of workers last year. As per the most recent information, ShareChat, which counts Google among its investors, has declared it will lay off 20% of its staff. However, large ed-tech businesses and other competitors are also adopting similar actions. ShareChat is not the only Indian tech player considering job losses. Nearly 700 employees at Goldman Sachs were let go from their jobs in India.

Courtesy pic: www.thequint.com

Employees are asked to come to a conference room where they are told that they have been fired and asked to go instantly without giving them a chance to return to their desk. Employees reported on the grapevine that teams and hierarchies are seeing mass layoffs. “In a difficult macroeconomic situation, our goal today is to size the company right for the opportunities that lie ahead of us,” the company said in a statement.

These 5 reasons are to blame for these mass layoffs:

1. Fear of the Recession:

IT firms are reassessing their spending and preparing for a potential recession amid general caution regarding the decline in the global economy. Most economists say that geopolitical tensions will also continue to influence the state of the world economy.

As demand returns to pre-Covid levels, the debt bubble appears to be about to burst, and firms also fear a recession. They are also cutting costs by ending unproductive projects and getting rid of the surplus and expensive resources they were using to  accelerate expansion.

2. Covid Shock:

During the pandemic, there was a rise in demand as a result of the lockdown and increased online activity. Due to the COVID-19 outbreak and the habits it encouraged, such as remote work and online shopping, tech companies hired swiftly and aggressively.

mass layoffs
Courtesy pic: www.moneycontrol.com

3. Overhiring in a pandemic:

Companies hired too quickly, spent excessively, and acted “ineptly” during the “battle for expertise” during the boom period.

Many IT companies went on a hiring spree to meet up with demand because they thought the boom would continue long after the outbreak. But as the restrictions were relaxed and more people ventured out, demand declined, costing these large tech firms a great deal of money. The rapid increase in demand required the hiring of some of these resources at a greater cost.

4. Ukraine-Russian War:

These mass layoffs were also affected by the increased market instability brought on by the conflict.

5. Inflation:

Rising inflation has negatively impacted several economies around the world, which has made the job market issue worse. For example, the Fed increased interest rates when the U.S. experienced severe inflation, which weakened the economy. From there, the growth stopped. To get past all these ups and downs, the world is currently pressing the reset button.

By Poonam

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