What Drove Spotify to Lay Off 17% of Its Workforce?

Spotify experienced a surge in its shares, closing up over 7% on Monday, following the announcement of a significant workforce reduction constituting 17% of its employees. The move aims to streamline costs and adapt to a deceleration in growth.

In an internal communication to staff, Spotify CEO Daniel Ek emphasized the necessity of substantial actions to optimize the company’s costs. Ek acknowledged that during the years 2020 and 2021, when capital was abundant and tech companies were expanding their teams, Spotify took on an excessive number of employees.

Approximately 1,500 jobs are expected to be affected by this latest round of cuts, according to an anonymous CNBC source familiar with the matter. The exact number of roles impacted was not disclosed by a Spotify spokesperson.

What Did Spotify’s CEO Communicate to the Staff?

In a memo shared on Spotify’s website, Spotify CEO Daniel Ek expressed the company’s commitment to building a sustainable business aiming to be the world’s leading audio company. He recognized the challenges posed by the economic slowdown and increased capital costs, stating that Spotify is not immune to these market realities.

Despite reporting a profit of 65 million euros ($70.7 million) for the third quarter, attributed to reduced spending on marketing and personnel, Spotify layoff plan is part of ongoing adjustments. The company had raised subscription prices earlier in the year and expanded into podcasts and audiobooks.

This round of layoffs follows previous cuts earlier in the year, including a 6% reduction (about 600 employees) and a 2% reduction (approximately 200 roles). Spotify’s shares, however, have more than doubled in value over the course of the year.

Analysts from Wells Fargo suggested that these layoffs are indicative of Spotify’s sustained focus on achieving profitability targets rather than a reaction to economic challenges. They also pointed out that the reduction in headcount could contribute to nearly a 2% reduction in operating expenses by 2024.

Severance pay for Canadian Spotify’s employees

In Canada, non-unionized workers and executives employed at Spotify are entitled to receive their full severance pay if they lose their jobs due to downsizing or corporate restructuring. The severance package can extend up to 24 months’ worth of pay, contingent on various factors. Individuals who do not receive the complete severance amount have the right to seek compensation and are advised to consult with legal professionals to guarantee they receive their rightful entitlement.

At Whitten & Lublin, we recognize that dealing with job loss or termination can be a daunting and stressful ordeal. Our team of seasoned employment lawyers is ready to assist you in navigating the legal avenues available to you, ensuring that you obtain the compensation you are rightfully owed. We encourage anyone impacted by the recent layoffs in Canada to get in touch with us for a consultation, either through our online portal or by phone at (416) 640 -2667 today.