News Article

BUSINESS NEWS - Layoff alternatives called for as tech sector redundancies hit 200,000

Posted 25th January 2023 • Written by Dan Cave on •

With Google, Microsoft and Spotify the latest technology companies to announce redundancy plans, HR and legal experts are calling on businesses to consider other options and good processes.

Since the start of 2022, redundancy tracker has reported over 210,000 technology sector layoffs made, 55,000 of which were in January 2023 alone.

This includes 6% of the workforce at Google, as well as redundancies at WeWork and 600 jobs to be cut at Spotify announced just this week.

Despite uncertain economic outlooks and falling share prices cited as reasons for mass layoffs Rachel Suff, senior policy advisor at the CIPD, said it is crucial to consider alternatives.

Speaking to HR magazine, she said: “In the UK, an employer must properly consider alternatives to avoid redundancy, such as redeployment or wage flexibility.

“Redundancy should always be a very last resort, but if the employer has no choice, they must follow a fair and legal procedure according to country-specific legislation.”

Different pieces of research show that layoffs do not always benefit company productivity, share price or profitability.

In fact, a 2005 Academy of Management Executive journal article stated that companies that downsized in the face of recession remained less profitable overall.

Research by Peter Capelli, director at Wharton’s Centre for Human Resources, found layoffs offered nothing but a short-term accounting fix.

Business leaders have not always gone down the layoff route, either.

Satoru Iwata, ex-CEO at Nintendo said that he disliked redundancies as a financial fix as they impact employee morale and creativity.

If a company does decide to make layoffs, Suff said businesses should be clear in communication around redundancies and offer practical and wellbeing support, such as off-boarding services.

She added: “It's also important to train and support line managers to have empathetic conversations and listen to concerns, as they are likely to be the first point of contact for those at risk of redundancy.”

Samantha Owen, employment law solicitor at Harper James said mass layoffs require consultation with employee representatives and can result in financial and brand damage if handled incorrectly.

She said: “Dismissing employees is never easy, especially when you may have known and worked with them for quite some time. To help you get through this, good planning is absolutely essential.

“Whilst often a business needs quick results, the speed of the process needs to be balanced with the rules on collective consultation and having the time to fairly consult. Getting that balance right is key to a fair process.

“Being sensitive, measured and calm in your approach will also pay dividends.”

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