2023 has kicked off with a slew of layoffs. Here’s how companies are deciding who to let go.
Every other news article these days is about layoffs in one company or another. According to the layoff tracking platform, Layoffs.Fyi, just one month into 2023, 57,601 employees have been laid off from across 185 tech companies worldwide.
These layoffs are a continuation of the tech downturn that started last year. They are occurring due to the change in consumer dependence on technology and increased interest rates. There is also a rising fear that 2023 will witness a global recession, which doesn’t bode well for the average salaried person who might end up being fired as companies try to cut down their spending.
If you, like most other people out there, are concerned about being laid off, here is a look at how companies choose who to lay off and who to keep.
Criteria for layoffs
The business-first approach to layoffs
A lot of different factors are considered when laying off employees. The first includes ensuring the business runs smoothly with the least resources possible. To do so, a company would first let go of employees who aren’t essential to the functioning of the business. So, jobs that don’t necessarily generate revenue would be the ones to go, and those that actively generate revenue stay. In a tech company, this would mean that once a product has been developed, the developer’s job would be at risk, and those of engineers and sales and marketing teams would be safe.
The skills of the employee
The second factor could be the employee’s knowledge and skill set. This implies keeping employees who bring new and diverse skill sets to the table and letting go of those whose skills lag. It would mean that relatively older employees get laid off, and younger ones thrive with advanced skill sets. Think of it this way: a new coder would enter the company, learning programming languages that the older employees hadn’t had a chance to pick up.
The seniority of the employee
This method of layoffs is called the last-hired-first-fired policy. As per this policy, the senior-most employees are the ones that survive the layoff season, and the lowest rung of the ladder is the one that goes first. One of the reasons for this could be that those in senior management positions have already worked through different levels of the company and could step down and take on more minor roles when the going gets tough.
According to research conducted by workforce intelligence company Revelio Labs, companies tend to select their junior employees to be laid off first. Most employees getting laid off right now have only spent about a year with their organization.
The status of the employee in the company
During layoff seasons, some companies may be inclined to provide security to their full-time employees. Thus, those working part-time or on a contractual basis will likely be let go. The ex-Vice President of Human Resources at Microsoft said contract workers are the most “at risk” when layoffs occur. Since companies don’t have the same liabilities towards contractual employees as toward full-time workers, laying them off reduces the threat of legal action.
However, unless an organization primarily comprises contractual workers, laying them off wouldn’t make much of a difference to the company’s financial health. Thus, the employer would have to use one of the other criteria we have mentioned along with this to cut costs.
The financial liability of the employee
Finally, since the entire layoff process boils down to cost cutting, how much the employee costs the organization would also have to be considered when deciding who needs to be let go. So, employees who charge higher wages than their peers, irrespective of the job category, are likelier to be laid off. Similarly, an employee’s return on investment (ROI) would also be factored into layoff decisions. The higher an employee’s output, the higher their chances of staying on.
Companies may use one or more of these factors to determine who needs to stay and who needs to go from their workforce. While this list gives you an idea of how vulnerable you are during the next round of layoffs, it doesn’t say with any certainty that X, Y and Z groups are set to go. You could try taking on more office responsibilities to reduce your chances of being laid off. It would show your employer that you are an invaluable asset to the company. It might also be a good idea to update your LinkedIn Profile and resume in case you have to switch jobs.
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