(Editor's note: A month after this story was published, Amazon confirmed plans to layoff more than 18,000 employees.)
Amazon plans to lay off as many as 20,000 employees across the company in the coming months, including distribution center workers, technology staff and corporate executives—about twice as many as previously reported—as the retail and cloud computing giant retrenches after going on a hiring spree during the pandemic.
Amazon employees are ranked from level 1 to level 7, and staff at all levels will likely be affected, according to sources with direct knowledge of the matter, who requested anonymity. The New York Times first reported in mid-November that Amazon would enact mass layoffs, citing sources that said that as many as 10,000 people would be laid off.
Company managers over the last few days, however, have been told that they should try to identify work performance problems among employees, as part of an effort to lay off about 20,000 people, according to sources. Twenty thousand employees are the equivalent of about 6% of corporate staff, and about 1.3% of Amazon's total 1.5 million-strong workforce including global distribution center and hourly workers.
Corporate staff have been told that employees will receive a 24-hour notice and severance pay, in accordance with their company contracts. “There is a sense of fear among employees in the company as the news has come out,” said one source who was told directly about the layoff effort. The layoffs would be the largest staff reduction in the company's history.
“There is no specific department or location mentioned for the cuts; it is across the business. We were told this is as a result of over-hiring during the pandemic and the need for cost-cutting as the company's financials have been on a declining trend,” said the source.
In the wake of the New York Times story, Amazon CEO Andy Jassy on Nov. 17, in a public message to employees, confirmed that layoffs were occurring, though he did not specify the planned number of employees to be laid off.
"Our annual planning process extends into the new year, which means there will be more role reductions as leaders continue to make adjustments. Those decisions will be shared with impacted employees and organizations early in 2023," Jassy wrote in the message, noting that the company had already communicated that layoffs would occur in the Devices and Books businesses, and would be extending a voluntary reduction offer for some employees in the People, Experience, and Technology (PXT) organization. Meanwhile, sources have confirmed that employees on the company's robotics team have been laid off.
In response to a query, an Amazon spokesperson did not comment on the reports from sources that the company is looking to cut 20,000 employees, instead pointing to a passage in Jassy's Nov. 17 message that read, "We haven’t concluded yet exactly how many other roles will be impacted (we know that there will be reductions in our Stores and PXT organizations), but each leader will communicate to their respective teams when we have the details nailed down.”
Amazon needs to cut costs, says CEO Jassy
Jassy elaborated on the layoffs Wednesday during an interview at The New York Times DealBook conference, saying, “We just felt like we needed to streamline our costs.”
Amazon's retail business grew quickly during the early days of the pandemic, which “forced us to make decisions at that time to spend a lot more money and to go much faster in building infrastructure than we ever imagined we would,” Jassy said at the conference.
“We knew we might be overbuilding,” Jassy said.
While enterprise IT spending is still expected to grow over the next year, the forecast hasn't been strong enough to allay concerns of tech industry giants, particularly those with big consumer retail businesses. During a period of rising interest rates, the war in Ukraine, high fuel costs, supply chain issues, and a decline in personal PC sales, many tech giants have announced layoffs in the last few months.
At Amazon, even its most profitable business and cloud services division, Amazon Web Services (AWS), has been showing signs of slowing growth since the beginning of this fiscal year, reporting revenue growth of 27.5% year-on-year for the quarter ended September compared to 33% and 36.5% year-on-year growth for the prior two quarters, respectively.
During its third-quarter earnings call with analysts, Amazon CFO Brian Olsavsky attributed the decline in growth to macroeconomic conditions that were forcing Amazon customers to cut down on expenditures to save money in the short run.