Prepare for an onslaught of layoffs.
- Layoffs tend to peak in January. Often it makes sense for companies to adjust their budgets then.
- Amazon just told staff it’s cutting 18,000 roles, the largest layoff in the company’s history.
- Compass has cut staff three times in eight months. It’s best to avoid multiple rounds of layoffs.
Happy New Year! Don’t let the door hit you on the way out!
For all the layoffs that swept corporate America in the final months of 2022, this month is poised to bring even more. January is historically the worst month for layoffs, according to data from the US government.
Already, Amazon CEO Andy Jassy has told staff that the company would cut 18,000 employees, which is the largest layoff in the company’s history. And real-estate brokerage Compass let employees know it would be conducting its third round of layoffs in less than eight months.
New year, new headcount
There are many reasons why January tends to be a popular month for layoffs, Cary Cooper, a professor of organizational psychology at The University of Manchester, told Insider.
For starters, there’s practicality: January 1 marks the beginning of a new financial year for most companies and so taxwise, it makes sense for companies to make adjustments to their budgets and reduce labor costs, he said. It’s also a time when employers are asking themselves: “What are we doing this year? What’s not going well? Can we change this or restructure that?”
The softening economy and looming recession fears are weighing heavily on corporate leaders right now, Cooper said. “Even if the US doesn’t go into a recession, the companies it trades with are, and so they’re trying to keep labor costs down so they remain competitive.”
Finally, companies often make cuts after the holidays so as “not to be perceived as Scrooge-like,” according to Cooper. “There’s an element of not wanting to do it over the Christmas season,” he said. “Instead, we will ruin your New Year after you spent all that money on presents.”
The first cut isn’t always the deepest
Laying off staff in January because you overhired the year before is already a potential stain on your reputation. Laying off staff a second — or third — time in a matter of months is potentially a really bad stain.
This isn’t a common practice, but it’s not unheard of either. Of the 433 tech companies that Crunchbase tracked, roughly 9% conducted more than one round of layoffs in 2022.
Amazon’s 18,000 job cuts, which affect about 6% of its corporate roles, are more than the 10,000 job cuts the company had been expected to make in the fall though Jassy had cautioned there could be more. The company started letting thousands of workers go last year, according to The Wall Street Journal.
Multiple rounds of layoffs can leave staff feeling insecure, not knowing whether they’ll wake up tomorrow to a foreboding email from human resources.
As Nolan Church, who previously ran talent teams at Carta and Doordash, told Keerthi Vedantam at Crunchbase News, “If I am an employee in a company that’s going through multiple rounds of layoffs unexpectedly, I’m losing faith in the business and I’m living in fear.”
Joel Gasoigne, the CEO of social-media management platform Buffer, previously told Insider that when he was conducting layoffs in 2016, one of the best pieces of advice he received was to “make sure you over-communicate that this is the end of the crisis” when the layoffs are over.
To the extent that it’s possible, it’s important to give your remaining staff a sense of stability. Gascoigne said it’s critical to “cut deep enough, cut enough costs that you can be confident that you are not going to have to do something else in three to six months.”