What’s driving mass layoffs in the tech sector globally?
Contents News/Article Date: 13th April 2023
Relating to which Act: The Indian Constitution grants the Central and state governments the powers to enact laws to protect the employees and foster a professional work environment. Based on the industry, nature of the work, number of employees in the company, location, and more, there are various legislations like the Industrial Disputes Act 1947 (ID Act), Factories Act 1948 (Factories Act), and Shops and Establishment Acts in relevant states (S&E Act).
Applicable to which State: Acts and Rules are applicable to all States
Type: TNN news Report
Pertains to: Establishments and Employees in all types of Organizations running businesses for profit or nonprofit
Relevance of this news: Karma Global has been in the business of HR Services, Payroll, Outsourcing, and Regulatory Compliances right from its inception in 2004 and since then, has brought in a lot of efficiencies and technological upgradations with experts on its role, to ease the hassles of Payroll Processing, Temp Staffing, On-boarding, Employee Life Cycle, Statutory, Regulatory, and Payroll compliances by providing customized solutions to all its elite clients.
Now Karma Global is also fully into labour compliance for nearly 18 years and is helping both establishments and workers for the fulfillment of obligations as per the laws of the land. It has over 200 direct and indirect staff on its rolls and operates on a pan-India basis. Recently, it has diversified into foreign shores as well, into countries like the US, UK, UAE, Canada, and South East Asia for handling payroll, outsourcing, recruitment, compliance, and governance.
Karma Global handles the obligations of all provisions contained in the labour acts and rules. Employees are entitled to several benefits under the Employment Act, including annual paid leave, sick leave, maternity benefits, paid public holidays, etc. Employers must ensure that they meet all of the Act’s standards and that the contract conditions reflect this.
Businesses must comply with the following requirements of the Act in particular:
- Minimum wage
- Maternity benefits
- Revision of wages
- Safer work environment
- Adaptive work culture
- Issuance of employment contracts
- Social contributions
- Health care and insurance
- Holidays and annual leave
- Termination, severance pay, grievance handling, redressal
And in this instance: The mass layoffs in the tech industry follow close on the heels of the hiring frenzy of Covid-19. But as tech companies seek to lower headcounts with a view to strengthening their balance sheets, the biggest chunk of jobs lost is actually not in tech-related roles. According to a report by 365datascience, the most laid-off workers, close to 28%, worked in HR and talent sourcing.
Software engineers were second with 22. 1% of jobs lost followed by marketing (7. 1%) and customer service (4. 6%) roles. A small portion of layoffs was in the PR, communications, and strategy departments (4. 4%), per the data available.
The report said that almost half of those laid off belonged to the age group of 30 to 40 years and had an average work experience of 11.9 years. Thus, the layoffs not only affected junior employees but seniors too as inflation, supply chain issues and geopolitical unrest hit these companies’ revenue growths. That’s a drastic reversal of the situation during the pandemic when the tech sector was booming and hiring skyrocketed with larger-than-usual salary packages – something that would have added to operational costs.
And in the previous instance: Accenture CEO Julie Sweet On Layoffs, Belt-Tightening, And Going After ‘Structural Costs’
Addressing a company optimization push that includes the layoffs of 19,000 employees, or 2.5 percent of the workforce, as well as real estate tightening, Accenture CEO Julie Sweet told Wall Street analysts the systems integration behemoth is going on a cost-cutting ‘offensive’ to get ahead of ‘structural issues that have been created over the last couple of years.’
And in the last instance: More than 17,400 employees in the tech industry have lost jobs in the month of February 2023 globally to date, with many workers in India receiving pink slips amid deepening global macroeconomic conditions.
In 2023 so far, around 340 companies have laid off more than 1.10 lakh employees worldwide, and there appears to be no respite from job cuts.
Subject: What’s driving mass layoffs in the tech sector globally?
Appended is the complete news item
What’s driving mass layoffs in the tech sector globally?
The mass layoffs in the tech industry follow close on the heels of the hiring frenzy of Covid-19. But as tech companies seek to lower headcounts with a view to strengthening their balance sheets, the biggest chunk of jobs lost is actually not in tech-related roles. According to a report by 365datascience, the most laid-off workers, close to 28%, worked in HR and talent sourcing.
Software engineers were second with 22. 1% of jobs lost followed by marketing (7. 1%) and customer service (4. 6%) roles. A small portion of layoffs was in the PR, communications, and strategy departments (4. 4%), per the data available.
The report said that almost half of those laid off belonged to the age group of 30 to 40 years and had an average work experience of 11.9 years. Thus, the layoffs not only affected junior employees but seniors too as inflation, supply chain issues and geopolitical unrest hit these companies’ revenue growths. That’s a drastic reversal of the situation during the pandemic when the tech sector was booming and hiring skyrocketed with larger-than-usual salary packages – something that would have added to operational costs.
Feeling the Pinch
A drop in stock price, declining sales, and economic fears have been cited among the reasons for downsizing by several software companies. Many venture-backed tech start-ups that have gone for layoffs pointed to a drop in start-up valuation and a slowdown in venture capital funding as factors that drove their decision.
There is a visible slowdown in the year-on-year growth in net income and revenue per employee for most of these tech giants. For the first time in this decade, Amazon reported a decline of almost 115% in 2022 over its 2021 net income, mainly in its retail unit, SAP, Salesforce, Meta, and Google were similarly placed with only Microsoft reporting a 17.7% increase in net income. Meta, Google, and Salesforce are among the companies that saw a significant drop in revenue per employee.
An AI Turn Point Point
It is evident that the focus of these tech companies is shifting towards AI and automation could arguably be adding fuel to the layoff fire. After the launch of OpenAI’s Chabot, ChatGPT, Microsoft announced its own Bing AI Chabot and Google announced its AI tool, BARD. Meta also announced the release of its AI tool named LLaMA (Large Language Model Meta AI)
Although these companies have not directly spoken about reducing payroll expenses to allocate cash flow towards building and developing AI tools, there is much speculation on the disruptive potential of advancements in AI and automation on employment across sectors.