Why Have Tech Layoffs Increased Despite Talent Shortage?

According to ManpowerGroup, 75% of employers globally struggle to find talent and fill open positions. This struggle persists across industries, and it’s also evident in the technology sector, where over 70% of employers face skills gaps.

The situation is no different in the UK, with the most hard-to-fill vacancies significantly higher in the public sector (51%) than in the private sector (34%), according to the CIPD research report .

It seems that the skills gap is getting wider. Why? Is it because technology is advancing quickly, or are the job market's needs changing again?

It’s worth noting that all businesses, no matter how big or what industry they're in, are having trouble hiring and retaining top talent.

But, while there’s increasing demand for talent, we are still witnessing layoffs across the IT industry.

And these complex issues are affecting both companies and employees. ?

What are the reasons behind this? How is everything connected? And how do we attract and retain talent in 2024?

IT Industry Layoffs: 2024 vs. 2023

Before we share some tips for retaining and attracting talent, let’s dive into some data about the current job market. To better understand the evolving job market, let's compare statistics from 2024 and 2023.

According to Layoffs.fyi (a non-government layoff monitoring site), the number of layoffs in this sector in 2024 has been higher than the number of terminations in 2023. So far, 209 tech companies have laid off approximately 50,312 employees in 2024, averaging more than 780 layoffs each day. In 2023, nearly 263,000 employees were laid off, averaging about 720 layoffs each day.

Now, let's look at some companies that have been in the media spotlight due to significant layoffs.

• Alphabet: Google’s parent company cut 12,000 jobs globally last year, or approximately 6% of its workforce.
• UPS: The company is laying off 12,000 employees, with 75% of reductions happening in the first half of 2024.
• Microsoft: In 2023, the company laid off around 10,000 employees, which is nearly 5% of its workforce.
• Salesforce: Last year, they announced cutting off about 10% of its workforce, or approximately 8,000 employees.
• Meta: The company announced a plan to eliminate around 10,000 jobs in March last year.
• Amazon: It has laid off 9,000 workers so far this year, while it led the numbers in 2023 with 16,000 layoffs.
• IBM: Arvind Krishna, IBM’s CEO, announced plans to cut 8,000 jobs in favour of AI-driven operations in December 2023. However, the current extent of the layoffs remains undisclosed.
• E-bay: The company plans to cut nearly 9% of its workforce, or about 1,000 workers, this year.
• SAP: The company announced that 8,000 jobs will be “impacted” by a shift in priorities toward generative AI . Last year, the company laid off more than 3,000 employees.

What is the reason behind significant layoffs in 2024?

The rise in layoffs could be related to various factors, such as over-hiring during the pandemic, the economic downturn, inflation, higher interest rates, shifting market demands, and rapid technology developments, especially advancement in AI (like Generative AI).

Or it could simply be related to shifts in the company's strategic approach to adapting to technological changes.

How do we meet the evolving expectations of the workforce?

In 2024, organisations need to take proactive steps to overcome recruitment challenges. This means adopting different approaches to tackle this talent shortage successfully.

Traditional tools like competitive salaries and clear career paths are still motivators for a large portion of the workforce today. But there are some new factors that people consider equally important.

Some include seeking better work-life balance, particularly through more hybrid or remote work options. There is also a need for higher salaries that are in line with the current cost-of-living crisis or a workplace that offers support with financial planning.

And let’s not forget about a healthy work culture. More people are seeking – even expect - a workplace culture characterised by trust, empowerment, respect, and servant leadership.

These elements are part of the baseline expectations for today's workforce.

? So, to attract (and retain) talent, companies should focus on these areas to better position themselves. Here are a few other tips worth noting:

? Investing in training and development programs to upskill existing and future employees is more important than ever. However, as time for training is limited, upskilling people will be challenging, which will put more focus on micro-lessons and micro-credentials. So, think about short and modular training programs that follow the latest technology and trends.

? Another trend worth mentioning is the shift to skill-based hiring . Simply put, focusing on candidates' capabilities rather than formal education. ?

? While competitive compensation packages attract employees, embracing flexible working arrangements and prioritising employee well-being can enhance employee satisfaction and retention.

? Leveraging technology and data analytics can help streamline the recruitment process and improve the quality of hires.

? There is also a shortage of childcare, which is preventing many parents from returning to work. One potential solution is to offer flexible options to provide much-needed employee support.

?Finding the right balance

As the industry continues to evolve and expand, it will be crucial to balance the growing demand for talent with the support needed for workers affected by layoffs and other job market challenges.

To do so, we must understand the skills gap, invest in employee development, leverage technology, and foster a healthy and positive workplace culture.

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