Alphabet spent an estimated $2 billion on severance packages. Here’s how much layoffs cost companies

When executives announce layoffs, they usually do so under the guise of financial discipline and the need to cut costs. But layoffs don’t run cheap. 

Between severance pay, extended health benefits, and refunding unused vacation days, the cost per employee adds up quickly. Multiplied by hundreds or even thousands of employees, the costs become significant even for the world’s biggest companies like Alphabet or Amazon. 

Then there are other sneaky expenses, which aren’t part of the standard employee compensation package, such as career services to assist ex-employees on the job hunt and immigration support for visa-holders. My colleague Geoff Colvin recently noted that many hidden costs associated with layoffs, like loss of institutional knowledge and a decline in employee morale, are incalculable. 

Those that are  more easily quantifiable help conceptualize the price of job cuts. For example, tech behemoth Alphabet, which laid off 12,000 employees, estimates it spent around $2 billion on severance packages. With the final number still to be determined, it appears that the company’s cost per employee will be between $158,000 to $191,000. 

Smaller tech companies like Shopify, Coinbase, and Robinhood have spent far less on their layoffs, primarily because they laid off fewer employees. Shopify, for example, laid off 1,000 employees, less than a tenth of Alphabet’s cuts. Its workforce reduction cost the company $30.5 million, averaging $30,500 per employee, the lowest on the list.  

Read the full roundup of layoff costs here.

Paolo Confino
[email protected]
@paolo1000_

Reporter's Notebook

The most compelling data, quotes, and insights from the field.

Here’s a plot twist: Some employees are relieved by the current layoffs. A small cohort of workers laid off from Big Tech and finance firms are reportedly embracing hobbies and taking their time to find better jobs. 

Per Bloomberg, “Getting fired is normally one of the biggest crises of a worker’s career. But the strange incongruity of today’s job market—where the unemployment rate fell to its lowest level since 1969 in January, even as tens of thousands of people were laid off from big tech companies like Google, Microsoft, and Amazon—is making it easier for employees who find themselves out of work.”

Around the Table

A round-up of the most important HR headlines, studies, podcasts, and long-reads.

- Pay transparency laws are addressing the gender pay gap as intended. But they’ve also had unexpected, and not entirely positive, effects on productivity and turnover. HBR

- New York and Washington, D.C., are now the most prominent job markets for software engineers as U.S. Companies look to scoop up laid-off tech talent. Wall Street Journal

- Over 200 union employees at NBC and MSNBC have scheduled a walkout Thursday to protest the firing of seven former staffers. Washington Post

- The toggling tax, a paper ceiling, quiet firing, and quiet hiring. Here’s your guide to the latest HR buzzwords. Bloomberg  

- Two railroad unions accepted a collective bargaining agreement that includes paid sick days for workers. CNN

Watercooler

Everything you need to know from Coins2Day.

Rethinking real estate. Cutting office space might seem like an easy way to reduce costs, but it can be an arduous process. Commercial leases are notoriously long and difficult to break.—Paolo Confino

Layoff blame. Many leaders blame mass layoffs on economic downturns and overhiring, but a Wharton professor blames outdated financial accounting rules that position human capital as an expense worth cutting. —Sheryl Estrada

Job TKO. Coins2Day asked ChatGPT which roles it thinks the bot will most likely replace in the future. Its response: data entry, customer service, and content creation. —Eleanor Pringle

McDouble trouble. A former McDonald’s employee alleges she was sexually harassed by her manager and dealt with a toxic work culture in yet another misconduct claim against the fast-food chain. —Orianna Rosa Royle

Curated by Amber Burton.