6 ms·

My initial reaction is "wow, nice severance package!" My secondary reaction is they must think things are going to be very bad for a very long time for this kin

My initial reaction is "wow, nice severance package!" My secondary reaction is they must think things are going to be very bad for a very long time for this kind of payout to make sense financially.

tempsy 7y ago
Depending on the role not everyone is going to have an easy time finding another job. Technical roles sure but areas like marketing and recruiting no.
- greenyoda 7y ago
  > Technical roles sure... I'm not so sure. Recent news has been that lots of startups are laying people off and Google has slashed budgets and frozen (or at least scaled back) hiring across the company.[1] Companies like Google and Facebook that rely on ads for most of their revenue aren't going to be doing so well when a lot of the businesses that buy their ads are closed down. Companies like Apple that sell premium-priced goods are also not likely to do well in a recession - people who have lost their jobs or are afraid of losing their jobs won't be running out to buy a new iPhone. [1] https://www.cnbc.com/2020/04/23/google-to-cut-marketing-budgets-hiring-freeze-expected.html https://www.cnbc.com/2020/04/23/google-to-cut-marketing-budg...
jlbnjmn 7y ago
Good point. If they're wanting to part ways with 25% of the workforce now, covering 3 months of full salary and 12 months of expensive healthcare, they must be expecting fundamental market shifts. Also, the debt they took on may have been partly to cover these lavish severance packages while also extending the runway. And yes, this is extremely lavish. Paying severance that appears roughly equal to the median annual income in the USA.
- b212 7y ago
  "Good point. If they're wanting to part ways with 25% of the workforce now, covering 3 months of full salary and 12 months of expensive healthcare, they must be expecting fundamental market shifts." Why? Can't they rehire the people they laid off during this period?
  - jlbnjmn 7y ago
    After rereading the article, it appears the layoffs are isolated to side projects. So it looks like just a healthy focus on the actual business. And for everyone previously asking why they needed so many employees, the answer is apparently they didn't.
    - dickjocke 7y ago
      Just because they've cut these projects or they're not generating revenue today doesn't mean they don't "need" them. What if the economy tanked in 2007 and Amazon decided to dissolve AWS?
- beagle3 7y ago
  It is generous by US standards, but it's just nice for many other western countries, where the standard is a few months of salary, or e.g. one month salary for each year worked (that is, if you had worked for the company for 5 years, you get at least 5 months salary on termination -- Israel mandates that one by law, for example, and NOT paying it is considered a criminal violation performed by the employer)
  - tjs8rj 7y ago
    Don't get the idea that those are free lunches. They are factored as an expected value in your total compensation for sure. It's part of the reason that median incomes in the US are much higher than Europe and everywhere else: less benefits requires higher cash compensation for the same marginal product.
    - beagle3 7y ago
      There are no free lunches. But do note that this is also factored in into AirBNB's/Google/FB/IBMs/Microsoft's compensation as well; They could have paid everyone more and let them save for themselves, but -- like healthcare -- factor it into the "employer's cost" of which "visible" salary+RSU+ISO+bonus is only a part (70-90% depending on many factors). The main difference is that in the US it is optional, so only the well-to-do employers and only at good-enough-time do it -- so the expected costs are weighted by the probability they will do them (say, 30% - I'm sure they have a good idea) -- and they can bail out at the last second if conditions are unfavorable for them to do that. In Europe the systems mostly mandate it. The difference is more striking with respect to pensions paid on retirement - they are "optional" for the employer in the sense that they could (and are) discharged in bankruptcy, meaning that after 40 years of employment, one bankruptcy event (we'll see many after the lockdown) is all it takes to deny those payments. There are no free lunches, indeed - the cost of higher US salaries are unpredictable (and often unfavorable) future cash flows for employees -- and only in some industries are the salaries high enough to actually allow the employees to prepare for that. edit: I've heard someone describe these forcefully-ensured severance and retirement funds as "denying one the ability to steal from their future selves". I think that's an apt description of what it is.

My initial reaction is "wow, nice severance package!" My secondary reaction is they must think things are going to be very bad for a very long time for this kind of payout to make sense financially.

tempsy 7y ago

Depending on the role not everyone is going to have an easy time finding another job. Technical roles sure but areas like marketing and recruiting no.

greenyoda 7y ago
> Technical roles sure... I'm not so sure. Recent news has been that lots of startups are laying people off and Google has slashed budgets and frozen (or at least scaled back) hiring across the company.[1] Companies like Google and Facebook that rely on ads for most of their revenue aren't going to be doing so well when a lot of the businesses that buy their ads are closed down. Companies like Apple that sell premium-priced goods are also not likely to do well in a recession - people who have lost their jobs or are afraid of losing their jobs won't be running out to buy a new iPhone. [1] https://www.cnbc.com/2020/04/23/google-to-cut-marketing-budgets-hiring-freeze-expected.html https://www.cnbc.com/2020/04/23/google-to-cut-marketing-budg...

jlbnjmn 7y ago

Good point. If they're wanting to part ways with 25% of the workforce now, covering 3 months of full salary and 12 months of expensive healthcare, they must be expecting fundamental market shifts. Also, the debt they took on may have been partly to cover these lavish severance packages while also extending the runway. And yes, this is extremely lavish. Paying severance that appears roughly equal to the median annual income in the USA.

b212 7y ago
"Good point. If they're wanting to part ways with 25% of the workforce now, covering 3 months of full salary and 12 months of expensive healthcare, they must be expecting fundamental market shifts." Why? Can't they rehire the people they laid off during this period?
- jlbnjmn 7y ago
  After rereading the article, it appears the layoffs are isolated to side projects. So it looks like just a healthy focus on the actual business. And for everyone previously asking why they needed so many employees, the answer is apparently they didn't.
  - dickjocke 7y ago
    Just because they've cut these projects or they're not generating revenue today doesn't mean they don't "need" them. What if the economy tanked in 2007 and Amazon decided to dissolve AWS?
beagle3 7y ago
It is generous by US standards, but it's just nice for many other western countries, where the standard is a few months of salary, or e.g. one month salary for each year worked (that is, if you had worked for the company for 5 years, you get at least 5 months salary on termination -- Israel mandates that one by law, for example, and NOT paying it is considered a criminal violation performed by the employer)
- tjs8rj 7y ago
  Don't get the idea that those are free lunches. They are factored as an expected value in your total compensation for sure. It's part of the reason that median incomes in the US are much higher than Europe and everywhere else: less benefits requires higher cash compensation for the same marginal product.
  - beagle3 7y ago
    There are no free lunches. But do note that this is also factored in into AirBNB's/Google/FB/IBMs/Microsoft's compensation as well; They could have paid everyone more and let them save for themselves, but -- like healthcare -- factor it into the "employer's cost" of which "visible" salary+RSU+ISO+bonus is only a part (70-90% depending on many factors). The main difference is that in the US it is optional, so only the well-to-do employers and only at good-enough-time do it -- so the expected costs are weighted by the probability they will do them (say, 30% - I'm sure they have a good idea) -- and they can bail out at the last second if conditions are unfavorable for them to do that. In Europe the systems mostly mandate it. The difference is more striking with respect to pensions paid on retirement - they are "optional" for the employer in the sense that they could (and are) discharged in bankruptcy, meaning that after 40 years of employment, one bankruptcy event (we'll see many after the lockdown) is all it takes to deny those payments. There are no free lunches, indeed - the cost of higher US salaries are unpredictable (and often unfavorable) future cash flows for employees -- and only in some industries are the salaries high enough to actually allow the employees to prepare for that. edit: I've heard someone describe these forcefully-ensured severance and retirement funds as "denying one the ability to steal from their future selves". I think that's an apt description of what it is.