Why Are Tech Companies Laying Off: How Best to Avoid One

Why are tech companies laying off thousands of workers after the pandemic? This article will discuss the factors contributing to big tech companies laying off workers.

Since the beginning of the New Year, big tech companies such as Amazon, Google, Cisco, Twitter, HP, and so on have cut over 40,000 jobs. Before knowing why tech companies are laying off workers, you should know that more people worked from home during the pandemic. Thus, Tech companies’ stock prices increased, making them hire more staff and take on riskier investments.

According to Statista, over 106,900 employees across the tech industry lost their jobs in January 2023. The reason is due to the pandemic easing and increasing in inflation. The following are the main factors contributing to tech layoffs since 2022:

#1: Anticipation of Economic downturn

Why are tech companies laying off staff for fear of the upcoming recession? It serves as a survival method to cut costs when revenue and profits reduce. It all started from the data provided by the U.S. Bureau of Economic Analysis on July 2022, which shows a shrinking economy for the second straight quarter. Finally, the rise in interest rates is another condition threatening the economy’s health as it threatens profit margins.

#2: High Hiring numbers during the pandemic

Why are tech companies laying off? They hire many employees during the pandemic because people work remotely and order things online. During that period, people were under quarantine and encouraged to stay home, so they spent more time online.

The hiring of staff worked for tech companies as profits skyrocketed with the increase in demand. Companies must release these new hires when technology usage decreases after the routine resumes.

#3: Pressure from investors

Is pressure from investors why tech companies are laying off? Since revenues are reducing, investors want companies to cut off some expenses. Thus, the decrease in the high headcount is the way forward for investors.

Their backlash is due to the thinking that profits will decrease after the significant growth period this year. Ultimately, the layoffs show investors that the industry can make tough decisions to ensure long-term success.

#4: Post-pandemic reality

Most workers employed during the pandemic were experienced software engineers and developers rather than entry-level employees. They earn salaries in the six figures with enormous benefits, so tech companies must let them go.

Is tech still a promising career?

Despite tech layoffs since 2022, entering the tech industry is still a good choice. With high-roller salaries, you can use tech to simplify people’s everyday lives.

As of 2031, there will be a 15% increase in tech jobs, BLS projected. This is due to the endless career path options, as tech professionals have diverse job options.

How do you avoid tech layoffs?

Since you know why tech companies are laying off, there are some ways you can avoid it. You should undergo a cross-training program enabling you to work in multiple roles. With that, the company can shift you around when one department or role stagnates.