Lyft will incur a cost of around $41 million to $47 million related to severance and employee benefits.
American ride-hailing company Lyft announced on Thursday to lay off 26% of its workforce, in an effort to reduce its operating costs. The restructuring decision will impact approximately 1,072 employees.
Furthermore, the company said in a regulatory filing that it will scale back hiring and has eliminated over 250 open positions. Lyft will incur a cost of around $41 million to $47 million related to severance and employee benefits in the second quarter of 2023.
The company also expects to incur an additional cost related to stock-based compensation and the corresponding payroll tax expense related to employees who were impacted by this restructuring in the same quarter. Lyft added that it cannot correctly estimate these costs at this time as they depend in part on its future stock price. More details can be expected during the company’s first-quarter earnings call on May 4.
Earlier this week, Lyft’s newly appointed chief executive officer David Risher announced, without specifying the numbers, that the company will significantly reduce its team size in a major restructuring move. He added that the restructuring would be a part of the company’s plan to “focus on better meeting the needs of riders and drivers.”
Prior to the latest job cut, the ride-hailing platform had eliminated 700 jobs, or 13% of its workforce at that time, in November last year. It is noteworthy that Lyft, which operates in several cities in the United States and Canada, has faced several hurdles after its initial public offering in March 2019 that affected its financial performance and market position.
Some notable challenges include increased competition from other ride-hailing companies like Uber and new entrants such as Bird and Lime, significant increase in the cost of operations due to driver incentives, marketing costs, and investments in new business areas, among others. The Covid-19 pandemic also deeply impacted the company.
The layoffs at Lyft are part of a broader trend of tech layoffs that began in late 2022 and has continued into the new year, with companies like Amazon, Google, Microsoft, Twitter, Meta, and more also cutting jobs amid a grim global economic outlook. On Wednesday, Amazon announced to shut down its health and wellness monitoring system Amazon Halo and said to lay off some employees. The company has previously laid off over 18,000 employees in January and 9,000 more employees in March.