Amazon is planning to eliminate 14,000 managerial positions by early 2025 as part of a broader effort to save between $2.1 billion and $3.6 billion annually. This move represents a 13% reduction in the company’s global management workforce, bringing the total number of managers down from 105,770 to 91,936.
The latest round of job cuts follows earlier layoffs in Amazon’s communications and sustainability units. The changes are part of Amazon's ongoing efforts to improve efficiency and reduce costs across the business as it streamlines its operations and restructures various teams.
Reasons behind Amazon's layoffs
Several factors are behind Amazon’s decision to cut jobs:
- Cost Efficiency: Amazon’s managers earn between $30,000 - $311,000 annually, according to Indeed. Eliminating 14,000 managerial roles could lead to significant savings.
- AI and Automation: Amazon is investing heavily in AI and automation, reducing the need for as much managerial oversight.
- Economic Pressures: While the job market remains strong, investors are focusing on profitability rather than workforce growth.
- Return-to-Office Mandate: The recent push for employees to return to the office may be a subtle strategy to encourage voluntary attrition.
Amazon's workforce grew quickly during the pandemic, jumping from 798,000 employees in 2019 to over 1.6 million by the end of 2021. However, the company has since adjusted its staffing levels, with previous layoffs eliminating 27,000 jobs in 2022 and 2023.
According to media reports, these layoffs are part of Amazon CEO Andy Jassy’s strategy to improve operational efficiency and simplify decision-making at the e-commerce giant. Jassy aims to increase the ratio of individual contributors to managers by at least 15% by Q1 2025, reducing bureaucracy and speeding up company processes. He has already surpassed that goal.
The Amazon CEO explained the decision to Bloomberg earlier, saying, "When you add a lot of people, you end up with a lot of middle managers, and those middle managers, though well-intentioned, want to put their fingerprint on everything."
As part of the restructuring, Amazon has instructed some of its managers to take on more direct reports, limit senior-level hiring, and reduce compensation for certain employees. It has also introduced a "bureaucracy tipline" for employees to report inefficiencies and has directed managers to implement further measures to streamline operations.
This shift reflects a broader trend in the tech industry, with companies like Meta and Google also cutting middle-management layers to improve agility and reduce inefficiencies. To read more about layoffs in 2025, Click Here
These restructuring efforts align with Amazon's broader goal of boosting profitability. As part of its cost-cutting drive, Amazon has also scrapped several projects, including the "Try Before You Buy" apparel service and a fast brick-and-mortar delivery initiative.
Impact of Amazon layoffs
Amazon surpassed expectations for revenue and profits in the October-December 2024 period. Revenue grew 10% year-on-year to $187.8 billion, while profits reached $20 billion. However, the sentiment following results was tempered by weak guidance, as the company warned of a $2.1 billion or 1.5% impact from foreign exchange rates.
Amazon now expects first-quarter revenue growth of only 5% to 9%, with the low end marking the slowest growth on record.
In October last year, a report from Morgan Stanley indicated that Amazon plans to cut 14,000 managerial positions by the end of the first quarter of 2025. If this plan goes ahead, it would lower the worker-to-manager ratio by 15%, effectively flattening the organization. This restructuring could potentially save Amazon up to $3.5 billion each year, the MS report said.
On a more positive note, new tariffs imposed by the U.S. President Donald Trump could benefit Amazon by raising costs for its competitors. However, the tariffs might also affect Chinese sellers on Amazon's platform and increase costs for Amazon Haul, the company’s service for shipping low-cost products directly from China.
Additionally, analysts from Morgan Stanley noted that Amazon’s first-party retail business, which sells products directly from manufacturers, has the highest exposure to these tariffs. They estimate that 25% of the merchandise sold through this segment comes from China.
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