Analysis of Reasons for Layoffs by Technology Startups during Covid-19 Pandemic

Abstract

Several technology startups, both in US and India announced layoffs during the Covid-19 pandemic. Many of them gave the reason to be the pandemic which caused almost total shutdown of the business. This contrasted with many other companies like airlines which took the route of salary cuts and leave without pay rather than layoffs. However, the researcher’s study of these technology startups,indicates that the layoffs were more to do with shedding non-core businesses, eliminating management layers and terminating non-performers. Many of these startups had a large runway of capital and could have retained employees if they chose to. Severalof them resorted to layoffs after a fundraising round. Hence the pandemic was an excuse to realign their businesses, which would havehappened in normal course. However due to the pandemic situation and focus on companies to retain jobs, the severance policies announced were more generous than the ones announced earlier. This could set up a new precedent of more generous severance policies during layoffs. The employees can take away that they are always at risk if they do not belong to the core business or area of competency in a company. The midlevel and senior level managers must be cognizant that the value they bring in will always be evaluated against their compensation. They must ensure that their value is recognized. The researcher has analyzed startups that have enough capital to sustain.