Layoffs Being Used by Tech Companies to Win Back Power, Cut Pay: Recruiters

Layoffs Being Used by Tech Companies to Win Back Power, Cut Pay: Recruiters

  • The tech hiring landscape is dramatically different than last year, according to recruiters.
  • Amid layoffs and uncertainty, companies are taking longer to fill positions and offering lower wages.
  • Call it the big reboot. “We’re going to see a lot of changes” this year, said a recruiter.

At the end of 2020, Keri B., a recruiter, was working with a professional services firm that was desperate to hire.

He was so impatient, in fact, that the candidate she placed managed to negotiate a starting salary that she said was $20,000 more than her new boss was making. “That was the first time I was like, ‘Wow, this is crazy,'” said Keri, whose last name and workplace are known to Insider. “I see people who are new graduates right out of school making really, really high salaries.”

But in the middle of last year, Keri noticed a drastic change. Companies have become more “ruthless” on wages and less willing to offer wiggle room on perks like remote working.

Keri and other recruiters say candidate offers are now much lower and more like 2019 – before the pandemic triggered the Big resignationbefore Big Tech went on a hiring spree and before anyone had heard of “quiet stop.

Call it the big reboot.

“Yes, there is an economic downturn, but I think there’s a lot to be said for companies making strategic decisions to regain power and put their foot down,” Keri said.

Not only are companies lowering the wages of new hires, but recent layoffs and fear that there is maybe more to come also reduce the power of the remaining employees. “Doing all these layoffs and seeing all these layoffs in the news every day is a big worry for working people,” she said.

Tech hiring landscape drastically different than last year, recruiters say

Nikita Gupta

“Six months ago, if you were a developer, you could ask for anything,” said Nikita Gupta, a Big Tech recruiter.

Nikita Gupta

“Six months ago, if you were a developer, you could ask for anything,” Nikita Gupta, a Seattle-based Big Tech recruiter and founder of a job-finding company called, told Insider. “Companies would turn a blind eye and do whatever they could to get the person hired.”

Not anymore. “Now companies that are hiring are taking weeks and months to fill positions and they want to make sure they’re hiring the cheapest person,” she said. “Take it or leave it’.”

Heather Colvin, who recruits for tech jobs at small and medium-sized businesses in the United States, said the recent tech layoffs could, in part, be an acknowledgment by many big tech companies that they’ve not only over-hired , but that their payroll was too expensive compared to the market.

“Some of these companies were hoarding talent,” she told Insider. “And I think some have acknowledged that they’re paying people above market value.”

Colvin predicted there would be “a compensation reset” not only in salary but also in the incentives offered by companies – “benefits, signing bonuses and equity, and remote working “, she told Insider.

Speculation about the ‘real reason’ tech companies are laying off workers

Some on TikTok and Reddit applied that the ‘real reason’ tech companies are cutting jobs is to tamp down the big salaries inflated by the Great Resignation.

It might sound like some sort of conspiracy theory, but it might not be as far-fetched as it seems. Tech companies have raced to meet demand and have gone on a hiring spree during the pandemic. Reports show that Amazon and Meta, the parent company of Facebook, Instagram and WhatsApp, both doubled their number of employees during this period; Microsoft and Google have increased their employee base by more than half.

Talent competition, in turn, raise wages. At a time when wages were rising at the fastest rate in decades across all fields, tech companies were particularly generous towards new recruitsand even existing employees. Last February, for example, Insider reported that Amazon has increased its base compensation cap from $160,000 to $350,000.

The massive layoffs, which would have included highly paid managers at Google, could be a way for companies to reset their salary caps when they rehire. A year and a half ago, compensation was a “completely different ball game,” a former Google recruiter told Insider.

A telling data point: According to an internal memo obtained by Eugene Kim from Insider, Amazon only hires students or recent grads for its entry-level software developer jobs. Neither the memo nor Amazon’s spokesperson explained why the company thinks on-campus hires are better than experienced applicants, but it’s possible Amazon is targeting a younger, cheaper group of workers. , because “experienced engineers tend to demand a higher salary,” Kim reported.

According to Federal Reserve Bank of Atlanta Salary Tracker; “low-skilled” occupations, meanwhile, saw wage growth of 6.8%, which swelled in November and December. Similarly, jobs with salaries in the third and fourth quartiles – that is, the top 50% of salaries – have seen their salary growth significantly outpaced by the bottom half.

Layoffs aim to cut costs – and they also reduce workers’ bargaining power

Proving that tech companies are trying to reset their salary ranges would be next to impossible. It’s not exactly something companies would readily admit and the data would be hard to come by. Insider has asked Google, Amazon, Meta and Microsoft for comment. Microsoft had nothing to share; Meta and Google did not respond.


Amazon announced last month that it was laying off more than 18,000 employees.

Elaine Thompson/AP

An Amazon spokesperson said: “This speculation is entirely false. The job eliminations have not materially changed our overall compensation costs and, unlike other companies, we are not reducing the salary of no employees. , retain and motivate employees.”

Aaron Sojourner, a senior fellow at the WE Upjohn Institute for Employment Research, said “certainly layoffs reduce workers’ bargaining power.”

With more layoffs, there could be the creation of so-called monopsony power, a term that refers to the power that employers hold over wages and labor market conditions. Monopsony increases, Sojourner told Insider, when there are fewer replacement jobs for workers — which happens when there are layoffs or companies hire less.

“The days of expanding and offering ever-richer compensation to try to attract more and more talent into the industry – that’s on pause right now,” Sojourner said. .

The driving economic logic of layoffs is always the desire to cut costs, said Wayne Cascio, an industrial and organizational psychologist at the University of Colorado who has studied downsizing in American companies for decades. After all, workers are often a company’s biggest expense, representing up to 70% of total company costsaccording to Paycor, an HR software company.

“Based on that reasoning, if companies are overpaying workers, that means their labor costs have gone up, so they’re a more tempting target,” he told Insider.

Will tech companies then try to rehire their workers at lower wages? Cascio isn’t so sure: “That’s assuming there are people out there to rehire — and those people will forget how you treated workers in a downturn.”

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