Salesforce "hired too many people," will cut 7,000

A 10% cut to Salesforce's global workforce

Salesforce Co-CEO Marc Benioff revealed on Wednesday that his company will be laying off around 7,000 employees over the next few weeks, due to hiring too many people during the COVID-19 pandemic.

"As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we're now facing, and I take responsibility for that," Benioff said in a letter to employees that was filed with the US Securities and Exchange Commission.

"The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions. With this in mind, we've made the very difficult decision to reduce our workforce by about 10 percent, mostly over the coming weeks."

The San Francisco-based company had over 73,500 employees in early 2022, up 30% compared with 2021.

Employees to receive up to $1.4 billion

Salesforce said it expects between $1 billion and $1.4 billion in charges due to employee layoffs, including employee transition, severance payments, employee benefits and share-based compensation plans.

The company projects it will generate between $800 million and $1 billion in its current fourth quarter.

More than half of Salesforce employees are based in the USA.

"Employees who are initially affected by this decision will receive an email letting them know," said Benioff. "Our leadership will reach out directly to these employees and provide clarity for their teams about changes within their organisations."

Shutting up shop

In addition to the massive layoffs, Salesforce said it will 'select real estate exits and office space reductions' within certain markets, according to a separate SEC filing Wednesday.

These office closures are expected to be fully complete in fiscal year 2026.

The overall goal of the office closures and the employee cuts is to reduce operating costs, improve operating margins and continue advancing the commitment to profitable growth.

"The employees being affected aren't just colleagues. They're friends. They're family. Please reach out to them," said Benioff. "Offer the compassion and love they and their families deserve and need now more than ever. And most of all, please lean on your leadership, including me, as we work through this difficult time together."

IT layoffs

The IT industry has saw a massive number of layoffs in 2022 - including Arm, Microsoft, Amazon, Meta and Twitter, to name just a few.

Some of the firms, like Salesforce, cited hiring too many people over the past few years during the COVID-19 pandemic as the reason for the layoffs.

For example, San Francisco-based customer engagement platform company Twilio laid off 11% of its workforce: just under 1,000 employees.

"Twilio has grown at an astonishing rate over the past couple years. It was too fast, and without enough focus on our most important company priorities," said Twilio CEO Jeff Lawson in September.

Other IT companies are laying off employees due to underperforming sales. Last month, HP Inc. said it will eliminate between 4,000 and 6,000 employees by 2025 after reporting a fourth quarter 2022 sales drop of over 11% year over year.