2023 is set to be another big year for tech company redundancies, with high-profile companies worldwide scaling back their workforces across the industry - including tech giants such as Meta, Lyft, Salesforce, Netflix, Amazon and more.
What’s driving all the redundancies?
There are multiple factors at play here, these include:
Fallout from rapid hiring during the pandemic. During the Covid-19 pandemic, technology was heavily relied upon with high traffic on streaming services, ecommerce, and remote working software providers. Post-pandemic, people are now returning to the office, attending more events, and getting their retail therapy in store rather than online. So, the need for these services has sharply decreased.
The current economic climate caused by high interest rates and inflation has driven borrowing costs, making it tougher to secure investments. This tightening has created a shift in the way tech companies operate, as they had previously been heavy on the ‘investment’ business model.
Increased cost of living and supply chain issues has placed a premium on tech products.
Downturn of e-commerce activity. Throughout the pandemic, lockdown saw a huge uptake in online shopping - including food delivery apps. That consumer behaviour has changed as people return to traditional shopping, and dining-in. Many tech companies did not foresee this in their 2022 budgets and business plans, which has left them in a difficult position as we emerge post-pandemic.
Digital advertisers are abandoning platforms such as Facebook to cut back on spending. The zealous online activity we witnessed during the pandemic initially led to advertisers fighting for digital advertising space on websites and social media platforms. Due to the sudden decline in online activity, retailers have started to reign in their digital advertising spending.
Apple’s iOS privacy update has restricted ad targeting. Apple, one of the market leading phone companies, has recently introduced App Tracking Transparency (ATT) to give its product owners/users more control over how their data is tracked and managed by app developers - creating a new challenge for techs to navigate.
These interconnecting issues have led to mass redundancies across the technology sector as companies try to reduce their costs and extend their runways. However, at the same time, is this shift creating a bigger cost for employers: absenteeism (opens a new window)?
The unintended consequences of layoffs
In Lockton’s CFO Strategic Risk (opens a new window) Report, people risks were ranked as a top three risk of concern by CFOs in Q3 2022. The wide-range implications of aggressive layoffs need to be considered when responding to this risk:
Poor morale for remaining employees.
When organisations undergo mass redundancies, the workforce can be left deflated with low morale, feelings of anxiety, and burnout – often from taking on former employees' tasks. The effects of this can lead to large spikes in absences across the workplace.
Increased workloads, employee burnout and injury/illness arising from a high-pressure environment.
Whilst tech companies have reduced their headcount to decrease their overhead costs, what they might not have anticipated is the cost implications that can arise from absenteeism amongst workers ‘left behind’. According to our Waking up to Absence (opens a new window) report, the costs of absenteeism is one of the highest an organisation can incur, and its effects are detrimental to productivity, motivation, and can even lead to physical or psychological injury if prolonged.
With large gaps in a workforce, physical and psychological issues are more likely to occur with employees feeling under pressure to perform duties perhaps outside their capability, and lingering feelings of concern over their job security (especially in an industry enduring a major downturn), which could lead to them pushing themselves too hard. This adds to absenteeism, and even presenteeism (opens a new window) - a term given when an employee isn’t working optimally.
Irrespective of layoffs, industries such as cyber security in Australia are already on the brink of a mass exodus, with employees considering leaving their jobs due to stress and burnout as the current cyber world has caused workloads to skyrocket.
Post-layoff workers’ compensation claims, driving up business costs even further.
Another ripple effect from the layoffs is that the added strain on the workforce can lead to higher workers’ compensation claims, even more so when there is further absenteeism – it can become a vicious cycle for an organisation, with increased disruptions and burdened workloads.
How to identify absenteeism: employee data
Absenteeism can be caused by physical injury/illness that prevents someone from being able to perform their role, psychological injury/illness that inhibits their ability to work, or disengagement – also known as presenteeism. Following the aftermath of a large restructure/staff reductions, all are likely scenarios. The good news is that there are methods to identify, and effectively manage absenteeism in the workplace. For organisations with employees likely to undertake additional work, this overtime can also lead to increased errors and injuries due to fatigue.
To identify absenteeism trends in the workplace, organisations should review their employee data to see if there are any common themes emerging. This is more than just reviewing sick leave data or workers’ compensation premium costs. Considering the implications of regrettable turnover, overtime rates and leave without pay days can also provide insights into developing issues.
Three steps to manage absenteeism:
1. Ensure you have a consistent, coordinated, and targeted approach to injury/illness management.
2. Early intervention is key. Support in the first 72 hours of injury/illness will help employees to feel encouraged to rejoin the workplace. Our People Insurance Outperformance (opens a new window) report tells us that workers who receive support from their employer have up to five times greater odds of returning to work.
3. Assistance with the return to work and support for those who have taken on additional responsibilities will help smoothen the transition period. Our People Insurance Outperformance (opens a new window) report shows that the longer a person is absent from the workplace, the less likely they are to ever return to work. In fact, employees absent for over 70 days typically have only a 35% chance of ever returning to work.
In 2023, executives and boards need to consider the real implications of tech layoffs and ensure no unanticipated costs are felt. Acknowledging the real cost of employee absence is a good place to start.