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Spotify layoffs consequence of over-hiring epidemic, say experts

Commentators said big tech needs to be held accountable for mass layoffs

Spotify’s mass redundancies are the consequence of an over-hiring epidemic which became commonplace in the tech sector following covid, according to HR and technology experts.

In an email from CEO Daniel Ek, the music streaming giant announced it planned to slash 15,000 jobs, 17% of its workforce.

Ek’s email said: “To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount. [...] To be blunt, many smart, talented and hard-working people will be departing us.”

He said Spotify hired significant numbers when debt was made cheaper. 

He wrote: “In 2020 and 2021, we took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing and new verticals. 

“These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year. However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”

Read more: A quarter of UK organisations to make redundancies in 2023

Idris Arshad, people and inclusion partner at St Christopher’s, said Spotify prioritised profitability rather than sustainable hiring.

Speaking to HR magazine, he said: “I think [Spotify was] irresponsible in their hiring, planning and strategy. When it comes to growth, we need to grow responsibly and sustainably. That is where it goes wrong – growth for the sake of profits and not people.

“When you look at their profit levels it further assures you that they seem to not care about people, and that they could have avoided redundancies very easily by just taking a hit on their profits.”

Prasenjit Sarkar, an ecommerce and marketing consultant, said big tech companies are prone to irresponsible hiring tactics.

He told HR magazine: “For decades, executives in corporations have hired indiscriminately during ‘peacetime’. In a tech multinational I worked for years ago, we called it personal empire building. 

“The same executives would retrench and make redundancies before a poor quarterly earnings release. Typically on a ‘last in, first out’ basis.

“Market speculators applaud layoff announcements as they did in Spotify's case. But such stock price movements are short-lived. Layoffs are a convenient solution to placate shareholders and investors but actually, problems usually lie deeper.”

Read more: Why redundancy should only be a last resort

Spotify’s share prices have surged by 8% following the layoff announcement on Monday (4 December), and CFO Paul Vogel sold £7.2 million in shares the following day, one of the highest rates Spotify has seen in two years, according to The Verge.

Arshad said employers should be held accountable when mass redundancies are made to achieve short-term profitability. 

He said: “Companies should be made to justify significant growth and significant redundancies to a governing or decision-making body. At the moment the large tech companies are ultimately accountable only to shareholders. 

“Employees need more protection and quicker access to justice. To be successful in an employment tribunal, employees must wait years whereas organisations are able to have no consequence until after a lengthy process. There needs to be some monetary consequence for bad governance and leadership to deter large companies from doing this.”