As Lyft announced impending layoffs next week, the company now is taking action by cutting 26% of its workforce, affecting 1,072 employees. This decision will carry severance and benefits costs of up to $47 million in the second quarter of the year.
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A sign for the Lyft ride share pick up area is seen August 20, 2020 at Los Angeles International Airport in Los Angeles, California. - Rideshare service rivals Uber and Lyft were given a temporary reprieve on August 20 from having to reclassify drivers as employees in their home state of California by August 21.
Lyft Layoffs
A total of 1,072 employees or 26% of its workforce were affected by the layoffs implemented by Lyft in a new restructuring plan under the new management of Chief Executive Officer David Risher. Aside from this, TechCrunch reported that the company will not hire an additional 250 open roles.
Lyft believes that this decision will help with the company's improvements for its drivers and passengers despite costing them $41 million up to $47 million in severance and benefits costs in the second quarter of the year.
The company also expects additional costs related to stock-based compensation and the corresponding payroll tax expense for the affected employees in the new restructuring plan. Around 4,000 employees were hired by the company before the layoffs.
In his email last week to its employees, the newly appointed CEO clarified that this would not include drivers of the company as they are considered independent contractors.
Spokesperson Sona Iliffe-Moon stated that while this may be a hard decision for the company as they are not making it lightly, the result will be a far stronger, more competitive Lyft. The latest layoffs mark the second wave of the company, following the workforce reduction that affected 700 workers last year.
Also Read: Lyft Plans to Drop Shared Rides Offering to Focus on Operations Under New CEO
Risher stated that through this effort, the company aims to bring its costs down to deliver cheaper rides, compelling earnings for drivers, and much more profitable growth.
Lyft also considers removing its shared rides offering as it shifts its focus to the operations of the company. Rishe stated that other features may also be removed in the future, including Wait & See feature.
New Management
New Lyft Chief David Risher started his operations on April 17th. Engadget reported that he stated through employee communications and public messaging that there is a need to streamline operations for the company to get back to better meeting the needs of its drivers and passengers.
Risher was part of the executive shuffle implemented last March where Lyft Co-Founders Logan Green and John Zimmer both stepped down from their positions as CEO and President of the company. Both executives remained in the company as board members.
This decision reflects the company's struggles that it faced over the past few weeks. Analyst Mandeep Singh stated, "Amid a risk of cash burn and market-share loss, we think Lyft may explore strategic options, including a sale."
Related Article: Lyft Co-Founders Logan Green, John Zimmer Resign as CEO, President
