Explained: Why there are layoffs or job-cuts everywhere?
New Delhi, Nov 10: Just when the world was limping back to normalcy after the devastating affect of COVID-19, the fear of recession has loomed large with several MNCs initiating cost-cutting measures. In the last two months, many companies have fired their employees and restructured their workforce.
Data is clearly indicating that the global economy is already in a moderate slowdown and there's now a 98 per cent chance of a global recession, according to a report published by Ned Davis Research in September, and this has left workers worried about their future in their workplace.
Companies
opt
for
costing
cutting
measures
Meta
Platforms,
the
parent
company
of
Facebook,
Instagram,
and
WhatsApp,
on
Wednesday
announced
that
it
is
laying
off
11,000
workers
as
part
of
its
cost-cutting
strategy.
In
a
letter
to
employees,
Mark
Zuckerberg,
founder
and
CEO
of
the
company,
said
the
company
has
decided
to
reduce
the
size
of
the
team
by
about
13
per
cent
and
is
letting
11,000
employees
go.
Blood bath at another social media house as Meta fires 11,000 employees
Just days after Twitter takeover, its new boss Elon Musk fired over 3,000 out of 7,000+ employees. Microsoft (1,000), Snap (over 1000), Lyft (about 7000), Stripe (around 1,100), Coinbase (1,100), Shopify (1,000) and Netflix (450) have also taken measures to reduce the cost by sacking its employees.
Recommended Video
According to the data compiled by Crunchbase, over 32,000 workers in the US tech sector have been shown the door in mass job cuts, as of late July. "We've included both startups and publicly traded companies that are based in the US. We've also included companies based elsewhere that have a sizable team in the United States, such as Klarna," the analysis stated.
The same report claims that over 11,500 people have lost their jobs in India in 2022 alone. Recently, Byju's has announced plans to lay off 2,500 employees. Similarly, Unacademy (1,150 employees), Vedantu (624), Ola (nearly 500) and healthcare startup MFine (600) are some of the companies that have reduced their workforce.
Apart from layoffs, major IT companies, Infosys, Wipro and Tech Mahindra have reportedly opted for hiring freeze and have revoked offer letters given to students.
Why
is
there
a
layoff?
Many
are
wondering
why
there
is
a
layoff.
People
are
forgetting
the
fact
that
we
live
in
an
era
of
globalisation
and
a
small
impact
in
one
part
of
the
world
could
possibly
impact
everyone.
It
is
because
companies
do
not
get
funds
from
just
one
specific
region
alone
or
do
not
make
business
within
the
country.
So,
there
will
be
a
chain
reaction.
Ukraine
War
The
Russia's
invasion
of
Ukraine
is
triggering
the
recession.
The
war
comes
as
a
major
blow
to
the
economies
as
the
entire
world
is
feeling
the
effects
of
slower
growth
and
faster
inflation.
The layoffs at Twitter and an explanation by Elon Musk
It is because the warring nations are major commodities producers, and disruptions caused global prices to soar, especially for oil and natural gas.
"Impacts will flow through three main channels. One, higher prices for commodities like food and energy will push up inflation further, in turn eroding the value of incomes and weighing on demand. Two, neighboring economies in particular will grapple with disrupted trade, supply chains, and remittances as well as an historic surge in refugee flows.
And three, reduced business confidence and higher investor uncertainty will weigh on asset prices, tightening financial conditions and potentially spurring capital outflows from emerging markets," the International Monetary Fund (IMF) said in a report earlier this year.
Companies
playing
safe
The
inflation
and
the
fear
of
recession
followed
by
the
under-performance
in
the
first
quarter
have
made
companies
to
play
safe
and
take
steps
to
reduce
the
expenditure.
It
has
to
be
noted
that
the
top
30
companies
lost
$4.3
trillion
in
the
market
capitalisation
between
January
1
and
June
30
this
year.
It also made companies freeze the hiring. "Profitability is under pressure... When there is uncertainty on demand, we have to take these steps (a freeze on hiring and approvals for expenses more than $10,000). We believe... all firms are becoming pragmatic on controlling costs," an executive from Wipro was quoted as saying by Livemint.
Many IT companies went on a hiring spree due to the lockdown-induced online shift of businesses during the pandemic and now cutting the cost as it impacted their growth.
"At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments.
Unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I'd expected," Mark Zuckerberg, Facebook CEO, said in a letter to his employees after the mass layoff.
So, the non-performing or non-revenue-generating people are being fired from the companies.
"As we move forward in our journey towards making Udaan a profitable company, the efficiency enhancement drive and the evolution in business model has created some redundancies in the system, with some roles no longer required," an Udaan spokesperson told Inc42.
As the profits drop, the companies are finding ways to increase the profits with lesser staff and boosting productivity.
Should
employees
worry?
It
is
quite
common
for
people
to
have
'layoff
anxiety',
but
employees
should
take
measures
to
protect
themselves
from
getting
fired.
If
people
have
managed
to
overcome
the
difficult
'COVID' phase,
this
too
shall
pass.
Instead
of
getting
worried,
try
to
upgrade
your
skills
and
stay
connected
with
your
professional
network.
Last
but
not
the
least,
have
a
positive
attitude.