By: Lucia Izzolo, Associate Editor
In the latest round of tech layoffs, Spotify announced last week that they are shedding 6% of their staff. This amounts to around six hundred employees. The streaming giant joins companies like Meta, Amazon, Google, IBM, Microsoft, and more by letting go of significant portions of their workforce.
Spotify, like many other tech companies, engaged in a spending and hiring spree during the pandemic. Spotify expanded into new global markets and poured money into its podcast business. While the live music industry suffered, Covid-19 sparked an economic boom for many large companies within the technology sector. Individuals stuck at home due to lockdowns had more time and money on their hands, leading to an increase in the consumption of entertainment. However, as the pandemic slowly fades into history, so does this market trend. With the cost of living climbing and inflation rates remaining high, many individuals canceled their streaming subscriptions to save money.
The layoffs at Spotify follow the economic downturn widely felt throughout the tech industry. Daniel Ek, Spotify’s CEO, posted a memo to the company’s website citing the changing dynamics of the organization and a shift in spending priorities due to a challenging economic environment. Ek took full responsibility for the cutback in spending, stating that he was “too ambitious in investing ahead of our revenue growth.” Although no one likes to see people lose their jobs, the layoffs are a silver lining from an investor’s perspective. Cost-cutting measures are a positive sign, representing a company’s manifestation of a more profitable state. And it may be working––Spotify’s stock price increased 4.5% after the announcement.
From a legal perspective, Spotify has likely covered its bases, at least where its United States employees are concerned. Six hundred former Spotify workers may be without jobs, but they are not going home empty-handed. All affected employees receive five months of severance pay, healthcare benefits, and career counseling services. However, The Times reported that Spotify potentially breached United Kingdom employment law. Unlike the United States, where the default employment relationship is “at will,” employees in the United Kingdom enjoy contractual and statutory protections. Among these protections include a minimum statutory notice of termination of one week for every year of service (up to a maximum of twelve weeks’ notice). Whereas United States employers can terminate employment relationships for any reason—or no reason at all— dismissals in the United Kingdom are considered unfair if they are without reason and a fair procedure. United Kingdom employees at Twitter already took the company to the employment tribunal over how their layoffs were handled, and Spotify may be next.