Almost two months after cloud-based CRM software provider Salesforce announced it would be cutting around 950 jobs, the company has announced it will lay off about 10 per cent of its workforce, roughly 8,000 employees, and close some offices as part of a restructuring plan.
Salesforce had nearly 80,000 global employees as of February 2022, up from more than 49,000 employees as of January 2020.
In a filing with the Securities and Exchange Commission last week, the company disclosed that its restructuring plan calls for the company to incur charges between US$1.4 billion and US$2.1 billion, with up to US$1 billion of those costs being shouldered by the company in the fourth quarter of 2023.
Salesforce said these costs consist of up to US$1.4 billion in charges related to employee transition, severance payments, employee benefits, and share-based compensation; while up to US$650 million will be spent on exit charges associated with the office space reductions.
In a letter sent by Salesforce’s co-CEO Marc Benioff and attached to last week’s SEC filing, he told employees “the environment remains challenging, and our customers are taking a more measured approach to their purchasing decisions. With this in mind, we’ve made the very difficult decision to reduce our workforce by about 10 percent, mostly over the coming weeks.”
Salesforce over-hired during the pandemic
He added that as Salesforce’s revenue accelerated through the pandemic, the company over-hired and can no longer sustain its current workforce size due to the ongoing economic downturn. “I take responsibility for that,” Benioff said in his letter.
The company said it expects to complete most of the employee restructuring plan by the end of fiscal year 2024 and to finish its real-estate restructuring in fiscal 2026. According to Benioff’s letter, US-based employees affected by the layoffs will receive a minimum of nearly five months of pay, health insurance, career resources and other benefits to help with their transition.
Those outside the US will receive a similar level of support, with Salesforce confirming that local processes will align with employment laws in each country.
Despite having a relatively successful financial 2022, the year’s last quarter saw the company grapple with several high-profile executive departures, including co-CEO Bret Taylor and Stewart Butterfield, the chief executive and co-founder of Slack, both of whom announced they would be leaving the company in the same week. Salesforce acquired Slack in 2020 for US$27 billion, in a deal where Taylor played a key role.
The news comes as the WSJ reported that, based on estimates from Layoffs.fyi, employers in the tech sector collectively cut more than 150,000 jobs in 2022.
In comparison, according to data compiled by the site, there were only about 80,000 layoffs in March-December 2020 and 15,000 during the whole of 2021, meaning that technology companies have been laying off workers at the fastest pace since the COVID-19 pandemic began.