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GuestAug 10, 20225 min read

Mass Layoffs: Why They Happen and How to Avoid Them

If you’re tuned into the news, you likely already know what Netflix, Wealthsimple, Hootsuite, and Shopify all have in common. They’ve all fallen victim to the latest round of mass layoffs. And it appears that they won’t be the last. More layoffs are certainly upon us. As of late July 2022, over 30,000 U.S. tech workers have been laid off. From cryptocurrency to even e-commerce, it seems like no industry is truly safe. 

Missed profit goals, over-hiring, and pandemic-related disruptions got us here. But mass layoffs don’t have to be inevitable. As an executive, these layoffs have likely remained at the top of your mind. With some careful planning, you can ensure that your staff doesn’t have to be a part of the next layoff Zoom call.

It’s important to understand how mass layoffs became normalized, why they’re happening right now, and what you can do to avoid laying off your dedicated employees.


Mass Lay-Offs


A History of Layoffs

Believe it or not, mass layoffs were rare in the United States before the 1980s. Before the 1980s, layoffs were considered unusual and a massive failure of the business. Author Louis Uchitelle of The Disposable American explains that it was the expectation that the government would ensure stable jobs for the Americans. World War II and deregulation under President Jimmy Carter changed this expectation. Notorious CEOs like Jack Welch of General Electric and Al Dunlap of Scott Paper Company began to normalize mass layoffs and gloat about cutting workers’ jobs to encourage competition. 

Obviously, gloating about layoffs is not acceptable in the modern day. Executives know that cutting jobs is a gut-wrenching decision that no one wants to make. But the idea of competitiveness inspiring layoffs absolutely rings true when understanding today’s layoff boom. Tech companies feel the need to take drastic measures to stay profitable in a crowded landscape. Mass layoffs have become the default response to economic turmoil.


Mass Lay-Offs


Why Are Mass-Layoffs Happening in Tech?

Mass Lay-OffsThe current economic state is a perfect storm for layoffs. High-growth startups and tech companies that once predicted massive growth and expansion have fallen short of their goals. Basically, the boom of growth during the early days of the pandemic has cooled. Once considered a red-hot company given people’s pandemic habits, Peloton cut 2,800 positions in February 2022. 

Mass layoffs are everywhere, but they’re especially volatile in tech. In May 2022, mass layoffs in tech were up 781% compared to the first few months of the year. Paired with relentless inflation, some CEOs feel that layoffs are needed to break even. 

Given the air of uncertainty and panic, many experts say we’re headed towards a recession. Fear is driving slim budgets and hiring freezes as tech companies attempt to stock up on capital. It’s easy to get caught up in anxiety. But mass layoffs are far from the only answer to cost-cutting.


How to Maintain a Sustainable Business Model

Despite rumblings in the economy, mass layoffs are not inevitable. As a leader, you can use this opportunity to inspire your employees and wade through uncertainty together. With some careful planning and strategizing, you can make adjustments to avoid laying off your employees. Work with a consultant or labour lawyer to guide you in the following decisions.


Mass Lay-Offs


  • Cut Back on Spending

Break out your budget sheets and a calculator. It’s a good idea to perform an audit of any discretionary expenses. Think about your level of comfort with business travel, subscriptions, and investments. Cut any software that’s incurring a monthly fee that no one uses. Reducing team lunches from monthly to quarterly can save a few dollars without sacrificing culture.


  • Go Remote

Depending on your lease, going fully remote or hybrid a few days a week could save massive dollars. If you’re using a coworking space, it’s a no-brainer to reduce the number of days you require employees in office. Consider the fact that each half-remote employee saves employers $11,000 a year. Plus, this flexible work style will keep your employees happy, too.

Mass Lay-Offs


  • Hire Flexible Workers

Freelancers can be your secret weapon when you’re struggling to pay full-time salaries. By hiring freelancers to do consultant work, you get flexible access to their expertise. Hire freelancers to work on important projects or based on your current day-to-day needs. You can avoid mass layoffs and support your full-time employees by supplementing them with highly skilled freelancers. 

Allow Oomple to connect you with your next freelance professional. Book a call with one of our Account Managers to discover how Oomple’s freelancing platform can support your business needs.


  • Adjust Salaries

If you’re struggling to pay employees, raises may not be possible for your hardworking employees. To keep everyone’s jobs, a salary freeze may be in order. Communicate this to your staff and give a timeframe as to how long it will be in effect. If a hiring freeze still isn’t enough, think about implementing a salary cut for executives. Sure, no one would like a temporary 20% pay cut. But if it keeps people’s livelihood, communicate that value to them. 


Mass Lay-Offs

  • Issue Voluntary Layoffs

You don’t want to lose your talented employees. But if someone was thinking of leaving, voluntary layoffs will help you negotiate it. Offer a financial incentive to those who voluntarily wish to be laid off.  For employees close to retirement, this option may be mutually beneficial. You can start their retirement off strong and recoup some extra finances.


  • Reduce Hours

Remote work isn’t an option for everyone. If it’s needed, reducing hours can keep employees on the payroll. Conditions may require your full-time employees to only put in 30 hours for a short period of time. The hour reduction may shift priorities and daily tasks around for a while. But you maintain your workforce for when the economy looks brighter. 


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