Given that Amazon’s gross profit for the quarter ending 30 September 2022, was $56.833bn – an 18.69% year-on-year increase – it may have come as a surprise that the online giant is planning 18,000 redundancies.
The cuts follow a series of redundancy announcements at tech giants in recent months, including 11,000 jobs at Meta (13% of its workforce), up to 6,000 at the computer maker HP, 3,750 at Twitter and 1,300 at Snap, which runs Snapchat.
Amazon’s layoffs amount to 6% of its 300,000 corporate workforce and 1.2% of its global workforce of about 1.5 million. For a company with huge profits and wages on the low side given its lack of enthusiasm for collective bargaining, these are significant figures.
Asha Kumar, employment partner at Keystone Law, warned that there are dangers for tech firms in expanding and contracting rapidly – a kind of concertina effect. She told Personnel Today: “Past experience has shown that while shrinking the labour force might seem like a prudent cost-cutting measure on a longer term basis, treating employees as a disposable commodity can have negative long-term effects.
“This might be because valuable technical skills are lost, ex-employees join competitors or set up spin-offs or people leave afterwards as it erodes loyalty towards employers. Evidence suggests that exploring all creative options to avoid redundancies may be something that employers should consider before making dismissals.”
Amazon chief executive Andy Jassy cited the “uncertain economy” for the cuts, saying it had “hired rapidly over several years.”
He told staff: “We don’t take these decisions lightly or underestimate how much they might affect the lives of those who are impacted. Companies that last a long time go through different phases. They’re not in heavy people expansion mode every year.”
Jassy said the changes would help Amazon pursue “our long-term opportunities with a stronger cost structure”. He said the layoffs would mostly affect the company’s brick-and-mortar stores, which include Amazon Fresh and Amazon Go, and its technology solutions organisations, which handle HR and other functions.
Treating employees as a disposable commodity can have negative long-term effects” – Asha Kumar, Keystone Law
The exact nature of the job cuts will be communicated from 18 January, he added.
Cost-cutting at Amazon
The company’s cost-cutting programme started last November with redundancies among Amazon’s Alexa virtual assistant business, Luna cloud gaming division and Kindle team. It also ended programmes such as the Scout personal delivery robot.
Kumar said Amazon’s move was simply a response to the worldwide cost of living and energy crises. “Coupled with the aftermath of the coronavirus pandemic and not to mention Brexit, it is not surprising that things have got to this point,” she said.
She warned it was important that employers vigorously adhere to fair redundancy procedures to avoid employment tribunal claims. “It is too early to tell whether the redundancies will translate into increased employment tribunal claims, but history shows that following the last recession in 2009-10, the number of claims rose by 56% compared with the previous year. Of those claims, the focus was on unfair dismissal, breach of contract and redundancy.
“As individuals won’t necessarily walk into new positions and given the current climate, regrettably we can expect the claims flowing from the current wave of redundancies to be similar.”
Although the tech sector has taken a global hit, the UK hasn’t felt it so strongly” – Alexia Pederson, O’Reilly
Alexia Pedersen, vice president EMEA at business and learning tech firm O’Reilly, told Personnel Today that the redundancies were the result of the pandemic leading firms to rapidly accelerate operations. “The technology sector stands out because there has been a period of rapid acceleration in digital transformation over recent years,” she said. “This was accentuated by the pandemic, as many businesses had to quickly move to an online presence in a very short timeframe. New skill sets were hired, and employees were upskilled to help organisations transition.
“Some of these projects have now been completed and talent is no longer required; while other projects are still under way, budgets are being cut in line with the economic projections.”
She predicted the UK would not suffer unduly from the tech slowdown. “Although the tech sector has taken a global hit, the UK hasn’t felt it so strongly. Headlines emphasising the mass layoffs dominate the media but the numbers aren’t matching up. At Meta, 650 staff out of 11,000 total were laid off in the UK, yet roles for tech companies remain open.
“Some tech companies will want to take a cautious view and prepare for what may lie ahead by reducing costs, but the situation in the UK isn’t necessarily mirroring the global trend.”
Tech companies are also facing a changing landscape in terms of regulation from companies and by hosting tech firms. For example, privacy changes implemented by Apple a year ago made it more difficult for social media companies to target users with digital advertising or measure its impact. And governments the world over are looking to increase regulation to protect children from harmful content online, adding to social media firms’ costs and potentially reducing revenue. There is also the Russian invasion of Ukraine to add to the equation, which has had ramifications for technology providers.
Given these uncertain economic and political winds it can be seen that, despite huge profits in the recent past, tech giants are feeling increasingly developing concertina tendencies, putting jobs at risk.