Good morning—Paolo Confino here!
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
paolo.confino@fortune.com
@paolo1000_
