PayPal to lay off 2,000 employees as Big Tech reverses pandemic hiring surge

President and CEO Dan Schulman says FinTech company has made progress in focusing resources on core priorities and rightsizing its cost structure, but there is more work to be done

PayPal's headquarters in San Jose, California. PayPal's shares closed 2.32 per cent up at $81.49 at the close of trading on Tuesday. AP

Global payments company PayPal is laying off 2,000 employees, about 7 per cent of its workforce, as the technology industry continues to cut back on a hiring surge that began after the onset of the Covid-19 pandemic.

The layoffs at the company, co-founded by billionaire investor and activist Peter Thiel, were announced on Tuesday by in a memo to staff by president and chief executive Dan Schulman.

“These reductions will occur over the coming weeks, with some organisations impacted more than others,” Mr Schulman said.

“Change can be difficult — particularly when it includes valued colleagues and friends departing. We will face this head-on together, drawing on the unparalleled scale of our global platform, the strategic investments we have made to strengthen our core capabilities, and the trust and loyalty of our customers.”

Mr Schulman said the company had worked over the past year to adapt to “the challenging macroeconomic environment”.

Despite reducing its costs and recalibrating resources to focus on core strategic priorities, it still needs to slash its headcount, he said.

PayPal's shares closed 2.32 per cent up at $81.49 at the close of trading on Tuesday. However, the company's stock has declined about 54 per cent over the past year.

While the FinTech company reported strong third-quarter results last year, with revenue increasing 12 per cent to $6.85 billion, beatings earnings estimates, it reduced its annual revenue outlook due to an expected slowdown in spending in the US.

“This will be a challenging period for our community, but I am confident we will come through it together with compassion for each other, our values at the fore and a shared commitment to the future of PayPal,” he said.

The layoffs follow similar cutbacks at Big Tech companies that have cut thousands of jobs amid rising interest rates aimed at reducing inflation and growing fears of a recession in the US.

After a hiring frenzy following the onset of the Covid-19 pandemic, as a result of the pivot to digitalisation, companies such as Spotify, Meta, Amazon, Microsoft, Twitter, IBM and Google's parent Alphabet have fired thousands of employees.

While companies in the US let go of 363,824 jobs in 2022, 13 per cent more than in 2021, the technology sector was the leading job-cutting industry last year, according to Chicago-based global employment company Challenger, Gray & Christmas.

A total of 97,171 jobs were cut in the technology sector last year, a 649 per cent increase from 2021 — the highest since the dot-com crash that began in 2000, a survey by the company showed.

This week, the International Monetary Fund changed course and raised its global economy outlook estimate for the first time in a year, projecting that the world economy will expand by 2.9 per cent this year.

The US, the world's largest economy, is now set to avoid a recession and is projected to grow 1.4 per cent in 2023, after growing 2 per cent last year and 5.7 per cent in 2021.

The US Federal Reserve raised interest rates seven times last year to curb inflation, which hit a four-decade high.

The Fed is expected to raise interest rates on Wednesday by a more moderate 25 basis points after a series of 75 bps and 50 bps increases last year, as prices have begun to ease in the world's largest economy.