Twitter and Meta: tech company redundancies

Last week, big tech names dominated the headlines with reports of Elon Musk’s dismissal of around 50 per cent of Twitter’s employees – and Meta making 13 per cent of its employees redundant.

While the companies appear to have gone about the restructuring in very different ways, with some Twitter employees reportedly locked out of their accounts and systems before a company-wide email announced the redundancies, legal advisers to the tech industry can learn a lot from each process.

Why are tech businesses particularly at risk of downsizing right now?

First, tech is not immune to the broader economic conditions. Businesses globally are looking to cut costs and increase efficiency in response to the slowing economy and rising costs. The broader economic winds turning against advertising will affect many technology companies, doubly so those in adtech.  Twitter, in particular, has found advertisers got cold feet over advertising on the platform, magnified by the sense it will provide a consequence-free medium for ’free speech.’  The net result, sadly but inevitably, includes some headcount restructuring.

Many smaller tech companies are particularly vulnerable as they have been built on business models which assume fast growth fuelled by regular rounds of funding from seed and angel investors and venture capital. As market capital has dried up quite significantly, these businesses are being forced to pivot: making redundancies, changing their financial model and even going into ‘hibernation’ until the market frees up again.

Second, although most tech companies will be small in comparison to Twitter and Meta, some even at a start-up and growth level, most are built on innovation, making their models inherently risky. Even in a buoyant economy, if a visionary strategy doesn’t deliver as hoped, the business needs to make course corrections and may need to reshape its workforce to deliver differently.

And finally, some tech businesses - from Meta to start-ups - over-hired in response to changes to how people worked, lived and shopped during and in the aftermath of the pandemic. Meta has admitted it overestimated the extent to which we would continue to live our lives online post-covid 19, and it will not have been the only tech company which misjudged this difficult call.

What’s the difference in approach to redundancies in the UK and US?

It’s well known US labour laws tend to be more employer-friendly than their UK equivalents. Requirements for both consultation and compensation, especially for large-scale restructurings, are often considered onerous by US-based businesses taking advice on their UK subsidiaries.

Equally important for US employers is an understanding of cultural expectations. Twitter was widely criticised on both sides of the Atlantic for its treatment of departing employees. More generally, UK-based employees are likely to have higher expectations in terms of both how a redundancy process is handled (including  that they will be given some time to process and be consulted upon the potential loss of their jobs) and the severance package which may be on offer. Handling this aspect well not only benefits affected employees, but also increases the likelihood of the employer managing the process without legal claims or reputational damage.