Cut payroll to stay profitable? Layoffs are surging

Less than six months ago, United Parcel Service (UPS) announced its full-time drivers would be paid $170K per year in salary and benefits after tough negotiations with the Teamsters union. Many in business cheered the news – UPS drivers are among the best at what they do, and good news in the shipping industry historically signals good news for the economy.

Fast forward to this week: UPS announced it’s laying off 12,000 workers with a stated goal of reducing payroll by $1 billion. “2023 was a unique, and quite candidly, difficult and disappointing year,” UPS CEO Carol Tomé told shareholders in a company earnings call. “We experienced declines in volume, revenue and operating profits in all three of our business segments.”

UPS plans on cutting 14% of its 85,000 full- and part-time managers. And those who survive the cuts will be expected to work in the office five days a week from now on.

Firms ‘over-hired’ during the pandemic

These moves by UPS mirror similar mass layoffs underway at other profitable companies over the past two months:

• Google (Alphabet) is laying off hundreds of workers in its hardware, voice assistance and engineering teams. More cuts in other areas may be necessary later this year. The previous January, the company announced it would be laying off 12,000 employees largely in sales and advertising.
• Salesforce trimmed 7,350 workers and is closing offices to reduce costs. The job cuts equal 10% of the cloud computing firm’s workforce. eBay is also cutting about 10% of its employee base, with 1,000 or so workers being let go.
• Toy and game maker Hasbro announced a 20% slash in employees. About 1,100 workers got their pink slips a couple of weeks before Christmas.
• Wayfair is letting go of 1,650 people, most of them remote workers. The online furniture retailer made similar cuts 12 months ago. Wayfair CEO Niraj Shah admitted in a letter to employees that the company went “overboard with corporate hiring during COVID.”

“From 2020 to 2022, everyone took advantage of access to talent, remote capabilities and access to capital at lower interest rates that created a boom of hires,” says Stephanie Wernick Barker, president of the Addison Group’s Mondo Staffing. “[Now] you’re faced with ‘did we over-invest?’”

To be fair, not “everyone” over-hired during the pandemic. Aggressive companies certainly did. Bigger companies did. But the majority of smaller to mid-sized companies, most of whom aren’t public and beholden to shareholders, didn’t take the plunge.

Even so, the purge of talent in tech, sales, marketing and management will affect businesses that aren’t laying off people. Reason: Competitors will start interviewing talent on the market as resumes start pouring in. Some may even look to poach talent from companies like yours.

HR and hiring experts say companies will be very conservative on the hiring front this year. But when others zig, sometimes the smarter move is to zag. HR and hiring managers should always be looking for talent that can help boost profits.