Amazon’s severance packages for 18,000 laid-off employees cost $640 million (2024)

Amazon’s decision to lay off more than 18,000 employees last month amid a difficult macro-economic environment cost the company $640 million in severance packages in the December quarter.

According to the company, the figure also included severance packages of employees who were let go in January.

“We took a $640 million charge tied to the position elimination that we announced in Q4. A lot of that fell into Q1 into mid to late January. So the way to think about it is: for the terminations in January, the salaries for the first 3 weeks are covered in operating results for Q1,” Amazon CFO Brian Olavsky said in an earnings call.

“But the period after that, where there's weeks or months of severance coverage, job placement, a lot of those costs are what the $640 million charge was in Q4,” he explained.

Most of the job eliminations by the company primarily impacted its stores and device businesses as well as human resources teams. The severance charges were recorded primarily in technology and content, fulfillment and general administration on its income statement.

The cuts amounted to 6 percent of Amazon's roughly 300,000-person corporate workforce and represent a swift turn for a retailer that recently doubled its base pay ceiling to compete more aggressively for talent. It has more than 1.5 million workers including warehouse staff, making it America's second-largest private employer after Walmart.

In India, the company has reportedly laid off 1 percent of its workforce. In November 2022, it offered a “voluntary separation” offer to some Indian employees in the Amazonian Experience and Technology team.

Those who took it up were offered a lump sum severance equivalent to 22 weeks base pay, one week base salary for every six months of services up to a maximum of 20 weeks, medical insurance for six months and notice period or pay in lieu of it.

Later, a senior labour department official sent the company a notice on a complaint by the Nascent Information Technology Employees Senate (NITES), which termed the Voluntary Separation Policy as illegal. NITES is an NGO working for the welfare of IT/ITES and its related sector employees.

In the past few months, large numbers of employees have been fired from major tech companies, including Alphabet (12,000 employees), Meta (11,000), Twitter (4,000), Microsoft (10,000) and Salesforce (8,000).

In its guidance, Amazon said its operating profit could fall to zero in the current quarter as savings from layoffs do not make up for the financial impact of consumers and cloud customers clamping down on spending.

And while Amazon's holiday revenue beat Wall Street's expectations, the company believes sales growth in its long-lucrative cloud business will slow for the next few quarters, its chief financial officer said.

The company has braced for likely slower growth as soaring inflation encouraged businesses and consumers to cut back spending and its share price has halved in the past year.

Making a rare appearance on Amazon's quarterly call with financial analysts, Chief Executive Andy Jassy said "virtually every enterprise" was treading carefully on cloud and other costs in light of economic uncertainty.

"We're going to help our customers find a way to spend less money," he said. "We're trying to build a set of relationships in business that outlasts all of us."

Amazon's net sales increased 9 percent to $149.2 billion in the fourth quarter, compared with $137.4 billion in fourth quarter 2021. Net income decreased to $0.3 billion in the fourth quarter, or $0.03 per diluted share, compared with $14.3 billion, or $1.39 per diluted share, in the year-ago period.

(With inputs from agencies)

Moneycontrol News

first published: Feb 3, 2023 11:33 am

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