2023 seems to have successfully picked up from where 2022 left, at least when it comes to hurting the global economy to the point where even the biggest of companies are forced to downsize their workforce. In a continuation of a trend that began last year and gained traction since then, cloud-based software company Salesforce has become the latest company to reduce its workforce. The layoffs will occur over the coming weeks.
According to a report by Reuters, the largest private employer in San Francisco is looking to lay off 10% of its workforce, while simultaneously shuttering offices on “certain markets.” Both of these developments come as part of the company’s efforts to cut back on costs amidst economic uncertainty, a downturn in the market, and fears of a recession.
The news sent the shares of Salesforce up by 5%, which then fell by a short margin to reach $139.59. The report by Reuters adds that the new round of layoffs will lead to about $1.4-2.1 billion in charges, while about $800Mn -$1Bn will be recorded in the final quarter of the year.
Considering that Salesforce had around 80,000 employees at the end of the previous year’s third quarter, the current bout of layoffs would bring the number of affected employees to around 8,000. While the number is a big one, it still falls short of the more significant round of layoffs that other US-based companies – namely Facebook-parent Meta and Andy Jassy-led Amazon, which are looking to lay off over 11,000 and around 18,000 employees respectively.
In a letter to all employees, Salesforce co-CEO attributed the decision to lay off thousands of its workers to the “challenging” environment, as well as customers taking a “more measured approach to their purchasing decisions.” All affected employees will be notified via email, and Salesforce’s leadership will reach out to them and provide clarity.
Fortunately, the company will not let its employees leave empty-handed. Benioff said that Salesforce will provide US-based employees with a minimum of nearly five months of pay, health insurance, career resources, and other benefits. The severance package for employees outside the US will contain a “similar level of support, and our local processes will align with employment laws in each country.”
This move by Salesforce follows what has been a very similar scenario for most companies across the past two years. Salesforce, and many other technology companies, boomed during the pandemic when the reliance on cloud software and technology was at an all-time high and remote working and remote learning were the new normal. Benioff hints that Salesforce was too ambitious during that period and complemented its rapid growth in its revenue with over-hiring. Now that companies that relied on cloud software during the pandemic are looking to cut costs, companies like Salesforce are facing the music.
