Tech companies are dominating the news headlines with redundancies. This week, Amazon announced its restructuring plans to let go of approximately 10,000 staff members across corporate and technology. Last week Elon Musk let go of 50 per cent of Twitter’s employees, followed closely by Meta, who announced that it would make 13 per cent of its employees redundant.
Whilst the companies went about the restructuring in very different ways, with Twitter allegedly locking some employees out of their accounts and systems before issuing a company-wide email, we can learn a lot about how to do redundancies (or not to do them).
Why are tech businesses particularly at risk of downsizing right now?
There are three umbrella reasons why restructuring is common in tech.
In good economic times, many tech business plans are based and can thrive on a quick growth method that relies on funding. But today, the market capital has dried up, forcing tech companies to make redundancies and change their financial model. Some are even on stand-by until the market frees up again.
Second, all tech companies are built on innovation, making them inherently higher risk. Failures from innovation can result in lower headcounts being needed.
Finally, tech is not immune to broader economic conditions. Once advertising is affected, there’s a domino effect on those technology companies in adtech.
The net result? A need to cut costs, which often incurs some headcount restructuring.
How does redundancy affect those remaining?
There are often different approaches to restructuring in the UK and the US, both legally and culturally. Generally, requirements in the UK for both consultation and compensation are greater than in America.
Regardless of basic legal requirements, It should go without saying that job losses should be handled and communicated with humanity and decency.
How a restructuring is handled can dictate the success of the future of the business. If those remaining are unsettled and disturbed by the treatment of their now ex-colleagues, it can ruin morale and loyalty.
Things to consider when faced with redundancies
For small companies, this may be the first time they have dealt with redundancies, and this can be a very emotional process, not only for the impacted employee but for management too. Whilst the redundancy process is never easy, it can be be done well. Here are some things to consider:
- Take advice from the outset: Redundancy can be a complex area of law, and it pays to get the right advice sooner rather than later. There are many factors to consider when ensuring a redundancy process is fair and legal. You may have to weigh up any additional legal risk in making particular employees - particularly those who have previously made grievances or may allege discrimination - redundant.
- Plan as early as possible: The process in the UK takes some time, even in relatively straightforward cases. Every situation is different, depending on priorities and circumstances, so it’s essential to use your time wisely before you can launch the redundancy process.
- Begin with commercial decisions: Ask yourself why you are looking to make redundancies. Has revenue fallen, or has the shape of your business changed (or does it need to do so)? And can you identify, broadly, the roles which are likely to be reduced or eliminated?
- Budget for the redundancies: Your financial planning will need to factor in certain elements, such as:
- How much notice pay are the affected employees entitled to?
- Do potentially affected employees have accrued but untaken annual leave? If so, they will need to be paid in lieu.
- Will you pay statutory redundancy pay or offer an enhanced package?
- How will you undertake the consultations? Whilst online communications like Zoom or Teams have become the norm for many organisations, it’s usually better to have difficult conversations in person. Your approach must be as sensitive as possible.
There’s much to consider when faced with redundancies. It’s essential to be armed with the legal facts, but good processes combined with humanity are key.
There are steps in both the UK and the US that the management can take, with the help of their legal advisers, to make restructuring easier, manage reputation and keep the morale of those left behind high.
