“Lack of investment and difficulty in long-term planning means high-tech companies will continue to lay off” | CTech (2024)

When Betty Sofer was laid off in August from her HR role at tech company Verbit with 60 other employees she was surprised. But, in retrospect, there were warning signs. The high-tech sector has undergone major upheaval in the last year, and the company had a previous round of layoffs in which the HR team was cut in half. Nevertheless, when her turn came it was a surprise.

"I dealt with headhunting people who were laid off and was involved in the hiring and firing processes. But I still didn't see it coming," Sofer recounts. "A big part of my role was establishing the sourcing infrastructure, and I was the first and only person who did this. The hiring rate decreased due to changes in the company, and I thought that maybe that's why we were filling our time with data collection. After it happened, I understood it in retrospect.”

She says that she felt like “the ground was dropping out from under me. But what helps is understanding that there is rationality, that it's not something arbitrary, that there really wasn't an alternative."

Sofer worked at the company for two years focusing on increasing hiring sources, that is to actively identify candidates. "What happened is that due to the direction in which the company is heading, there was no need to maintain a sourcer because growth forecasts were canceled. There was no need to recruit more people, so the hiring team was fired, and now my former manager is the only person doing this work."

When she was laid off five months ago, Sofer received two months of full salary from the company, and then she began collecting unemployment benefits. The company also allowed employees who were let go to keep their computers and technical equipment. Overall, Sofer says, the process was respectful.

"After a week of resting I got back into action, and I was already at the stage of signing a contract with another company - then October 7th arrived. The company I was supposed to start with froze the process, and I also decided to pause searching. I volunteered at the headquarters of the kidnapped families. Just a few days ago, I decided to start interviewing again despite the ongoing challenges of the war. I feel that my previous experience gives me an advantage. I have a community of recruiters and headhunters and I used to conduct workshops and lectures in the field, so I come from a positive starting point. One of the important things in the job search process is to tell the world that you are looking. To go out with this statement externally, on networks, with friends, to identify the opportunities," she says.

HP, SolarEdge, Google, Amazon, SAP, eBay, and Unity are just some of the companies that have been part of the recent wave of layoffs in the high-tech industry. "Many employers are now starting the downsizing process, but the larger wave in high-tech had already started before the war began," says Limor Argov-Shenhav, a partner and head of the labor law department at law firm Weksler-Bregman & Co. She says this wave was part of a global crisis, which was exacerbated in Israel by the judicial overhaul and the rise in interest rates. "In Israel, the starting point is worse than in the rest of the world because the war doesn’t only affect high-tech - almost every company is making cuts," she says.

The war halted downsizing processes that began in the summer for a few months due to the shock to the economy. Most of the layoffs happening now involve employees not essential to the core business of the companies. The second type of layoffs taking place is the relocation of companies or departments abroad. In such cases, as happened with Facebook in mid-2023, the implications for the economy are more severe because then the money also leaves Israel. There are also companies that eliminate entire departments, like Verbit, or companies that close altogether, like proptech unicorn Veev.

An optimistic reading of the situation would say that current layoffs are actually a sign of a return to normalcy in the job market. "The Israeli economy is showing a slight recovery, but it still hasn't fully returned to normal,” says Liat BenTorah Shushan, Head of Career Development at AllJobs, citing the ongoing fighting and mass mobilization of reservists, which greatly impact the Israeli economy and the scope of layoffs.

“The lack of investment and the difficulty in long-term planning also affect high-tech companies that continue to lay off, from startups to tech giants." However, Shushan says that experience shows that even after crises and declines in activity, the economy has managed to recover. "Once the public understands that the war is over, we believe we will see rapid recovery and growth."

The global wave of layoffs, of course, is not related to the war in Gaza and is more influenced by factors such as a decrease in consumption or new AI technologies and their impact on the job market. "2024 is expected to be remembered as the year of the Generative AI revolution, and companies will need to allocate resources in that direction, sometimes at the expense of human capital. This may lead to further job cuts," says Maya Buchnik, career consultant and mentor at Drushim IL.

Israel, she says, is likely to witness additional waves of layoffs on top of those carried over from last year. "Cuts that were planned in advance for the post-holiday period and were delayed due to the war are likely to happen very soon. Indeed, in recent days, there have been reports of layoffs in certain companies. In some cases, these are plans that have not yet been implemented but are scheduled for the coming weeks," she says.

Despite the global wave and the local war, today the numbers still don’t reflect a severe crisis as was the case in the major crises of the 2000s or 2008. "The layoffs we are seeing in recent months are on a small scale, mainly on the fringes. These are mostly positions that the company can do without," says Chaim Geron, CEO of Infinity Labs, which provides training for tech professionals.

Last year, around 6,500 employees were laid off in Israel, and since the beginning of the year, about 1,000 employees have been laid off out of an industry of 400,000. "In previous crises, 90% of people survived it. Today, we aren’t at that level, and as of today, 98% of employees in the industry are still working. In addition, we hardly see unemployment because people find new jobs very quickly."

According to him, the crisis in tech is not as bad as people think. Moreover, there are roles that will always be in demand, such as cybersecurity or AI professionals. "There is a shortage of such experts, and highly skilled development professionals are a rare commodity for companies. Furthermore, the fact that there are still many reservists and universities have delayed studies creates high demand for employees," he says.

Roles that are usually immune to layoffs are those generally related to the core of the company, employees who develop the company's product. Those who write algorithms, code, and are responsible for advancing the product are usually not fired because the company cannot function without them. There are also industries more immune in times of war, such as defense and security industries.

"Companies like Rafael, Israel Aerospace Industries, and Elbit are at their peak in terms of orders, requiring a lot of skilled personnel over time, meaning that people who have been laid off may find work in these growing companies, and thus the market will continue to move forward," he says.

Even layoffs must have cause

Two weeks ago, a British woman, Brittany Pietsch, posted a TikTok video that garnered almost 3 million views, in which she filmed her dismissal from company CloudFlare where she was an account executive. In the video she asks the HR professional about the reasons for the decision. In contrast to the United States, in Israel, people cannot be fired on the spot or without cause. There are laws protecting employees, and employers are required to conduct a hearing before layoffs even when it comes to closing entire departments or downsizing.

"Especially when it comes to wide-scale downsizing, the obligation to conduct a hearing has increased. If companies choose to operate according to the ‘first in, first out’ principle, meaning those with the lowest seniority are the first to be laid off, then there is no need to add additional considerations for layoffs. But if they are not firing according to this principle, then layoffs need to be based on dissatisfaction, failure to meet goals, etc. For Brittany, who was fired in the TikTok video and claims she did meet goals, employers need to explain why they chose a specific employee over others," says Argov-Shenhav.

According to her, even in cases where an entire company is closed, they must conduct hearings to check that there is no legal impediment to dismissal. The hearing process is not just a procedure but is really intended to give employees and employers a second chance to reconsider the decision. Not every employee summoned to a hearing is fired in the end.

Beyond the legal aspect, the way companies choose to carry out downsizing and layoffs also has an impact on the employer's branding and the ability to retain existing employees. When Israeli employees at a global company hear that layoffs are coming, they are likely to preemptively leave before the wave reaches them.

"As soon as a layoff process begins, we recommend, first of all, to create transparency in the company about the situation, to make good employees feel protected, and to conduct the hearing process in a respectful way that takes into account both the company's interest, morale and the ability to retain the employees that are staying, which is critical at such times. The feeling that the ship is sinking may cause talent to leave," she says.