As part of its efforts to reduce expenses, the music streaming platform Spotify has announced that it will be laying off approximately 1,500 employees, which represents approximately 17% of its workforce.
This is the third round of layoffs that the company has implemented this year. In January, the company let go of 600 of its employees, and in June, it laid off 200 additional employees.
In a letter to staff, Spotify CEO Daniel Ek stated that the firm employed more people in 2020 and 2021 as a result of the lower cost of capital. He also stated that although the company’s output has improved, a significant portion of this increase is attributable to the fact that it has more resources.
According to the corporation, the layoffs would result in costs of around 130-145 million Euros (£111-124 million) in the fourth quarter. The company also stated that the majority of the cash component of the charges will be documented in the first and second fiscal quarters of 2024.
Read also: Spotify introduces free audiobooks for Premium subscribers
In its pursuit to reach one billion subscribers by the year 2030, Spotify has made investments totalling more than one billion dollars to increase its podcast business, has signed up celebrities such as Kim Kardashian, Prince Harry, and Meghan Markle, and has expanded its market presence in the majority of nations across the world.
The firm was able to turn a profit during the third quarter, which was made possible by the increase in prices of its streaming services as well as the growth in the number of subscribers across all countries. Additionally, the company predicted that the number of monthly listeners will approach 601 million during the holiday season.
At that time, Ek stated to Reuters that the corporation was still concentrating on improving its efficiency in order to maximise the value of each dollar.
As of Monday, he stated that a cut of this scale would feel significant in light of the recent strong earnings report and the profitability of the company.
“By most metrics, we were more productive but less efficient. We need to be both,” Ek said.
The commencement of layoff
Monday will mark the beginning of the company’s process of alerting concerned personnel. In addition to receiving vacation money and healthcare coverage throughout the layoff period, employees will get approximately five months’ worth of severance pay.
“We debated making smaller reductions throughout 2024 and 2025,” Ek said.
“Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”
Nigeria ranks 2nd behind South Africa in Spotify Podcast listenership
How HR will handle layoff
Anyone who has ever been in a redundant situation will attest to the fact that it is never an easy situation. Anger, fear, uncertainty, and worry are just some of the sensations that accompany the process of redundancy. The function of human resources in this emotionally complex world is a challenging one because of the many feelings that accompany it.
When you are a member of an HR team, regardless of whether you have a small group of individuals to assist you in navigating the redundancy process or thousands of workers, you will experience a wide range of emotions.
That group of human resource managers will likewise be wondering what the future holds, but they will also be required to respond to an overwhelming number of questions and negotiate the behaviour of employees who are preoccupied with their worries and the constantly shifting news headlines.
Considering that this is not the first time that Spotify has experienced layoffs in 2018, it is possible that morale among employees was already quite low.
To deal with this situation, the HR department would accept that feelings will be intense. They should be familiar with the redundancy policy and look for resources to assist people who require assistance.
