- Tech companies have reacted to the coronavirus crisis much differently than those in other industries, a new report indicates.
- Big tech firms were more likely to slash jobs before and after the shutdown orders than non-tech companies and have cut jobs at higher rates, according to the report from Visier, which helps companies analyze and optimize their workforces.
- Many companies seem to have gone into the year expecting slower growth even before the onset of the crisis, while others seem to have realized late that they’d need to make cuts in response to it, said Visier’s Ian Cook.
- But the news isn’t all bad: The tech sector saw a sharp increase in hiring in April and May, far outpacing nontech companies.
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Companies of all kinds responded to the coronavirus crisis by cutting jobs, but the axe fell much more frequently in the tech industry than in others, according to a new report.
The biggest tech companies started laying off workers sooner than their peers in other industries, made much bigger cuts as a proportion of total employment in the industry, and continued slashing jobs at high rates long after other kinds of companies largely curtailed their layoffs, according to the report, which was put together by Visier, a tech firm that helps corporations analyze and optimize their workforces.
Payroll and other employee expenses tend to represent a high proportion of tech companies’ costs, so it’s understandable that they would look to cut those to save money during the pandemic-related downturn, Ian Cook, Visier’s vice president of people solutions, told Business Insider this week.
“High tech is highly dependent on people,” Cook said, continuing, “We know that they’re always quick and careful to manage that cost base.”
Since the coronavirus started spreading widely in the US, tech companies big and small have been slashing jobs. Uber, Airbnb, IBM, self-driving car startup Cruise, and others have collectively cut thousands of jobs.
Tech companies started slashing jobs before the crisis hit the US
Mass layoffs in the tech industry actually preceded the onset of the crisis in the US, according to Visier’s data, which looks just at workers employed by large enterprise corporations. As early as mid-January, tech companies collectively laid off enough workers at a more than 30% annualized rate; in other words, if the cuts had continued at that pace for a full year, 30% of workers in the industry would have lost their jobs. After falling back down below a 10% annualized rate right after that, industry layoffs shot back up above 30% in early February.
They slowed back down after that, but still stayed above a 10% annualized rate from then until early April, when they hit their peak pace of more than 40%, according to Visier’s data. After dropping off again in mid-April, the rate rose again, getting above a 30% annualized rate by early May.
By contrast, the rate of job cuts in all the other non-tech companies went above a 10% annualized rate in early February and peaked at more than 30% in late February. Although it’s spiked twice since — once in April and once in late April, early May — it’s remained below a 20% annualized pace since the February jump.
The data suggests that many tech companies went into this year — even before the onset of the coronavirus — expecting slower growth and were curtailing some of their projects and products in response to that forecast, Cook said. The onset of the pandemic likely only amplified those concerns, he said.
“I don’t think anybody really forecast the impact of the pandemic, but they were already forecasting slower rates of spending from their customers,” Cook said, continuing, “That leads to layoffs happening in the beginning of the year.”
Tech industry layoffs have seen a resurgence
The resurgence of high rates of layoffs in the tech industry in April and May suggests that many companies were trying to weather the downturn but ended up realizing late they couldn’t without making cuts, he said. Many may have been expecting a quick and sharp rebound from the slowdown that followed the nationwide shutdown orders in March and early April, he said. Unlike companies in the retail industry, many tech companies may not have seen an initial hit from those lockdowns.
Meanwhile, finding and hiring highly skilled workers workers is a considerable expense and headache for tech companies, giving them an incentive to keep as many of them on staff as long as possible, he said. Given such factors, it’s understandable that the industry has reacted unevenly to the crisis, he said.
“Nobody had the playbook for what just happened,” he said.
Visier’s report wasn’t all bad news for tech workers. Even as many tech companies were cutting payroll, others were adding workers. Hiring picked up in the industry soon after bottoming out in late March and early April and has largely sped up since. By early May, tech companies as a whole were hiring at a 50% annualized rate, meaning that if they continued at that pace for the next year, they would increase their then-current headcount by 50%.
By contrast, hiring rates in non-tech companies, collectively, has trended downward since the beginning of the lockdowns and hasn’t gotten above around a 40% annualized rate, according to Visier’s data.
The difference can be chalked up to the fact that even amid the crisis, some tech companies have boomed. With many people working from home, video conference provider Zoom and corporate chat service maker Slack have seen surging use of their software. Companies that offer streaming video and app-based food delivery services also benefitted from the lockdowns.
“Other parts of our … tech sector, they’ve just seen unbelievable demand for their services,” Cook said. “So we know that they’re hiring like crazy.”
“It’s not always the same people that are letting go and hiring,” he said.
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