Amazon's RTO mandate is a 'backdoor layoff' strategy, future of work expert says

• Amazon's return-to-office mandate is a move to cut head count, says Stanford economist Nicholas Bloom.
• Bloom told BI the policy may harm areas like AI, where recruiting top talent is challenging.

Amazon's strict return-to-office push is an attempt to reduce head count, according to Stanford economist Nicholas Bloom.

Bloom, a leading expert on flexible working, said that requiring employees to work in the office five days a week could be a "backdoor layoff" strategy — a move sometimes used by employers to reduce head count without facing the consequences of formal layoffs.

He told Business Insider the move would probably succeed on that basis but would "damage areas like AI where it is hard to recruit top employees."

"Amazon presumably took the view they would rather control costs by cutting head count and take the hit of technology and innovation," he said.

Amazon's new policy of requiring employees to work in the office five days a week has been unpopular with workers. After the announcement, some Amazon employees took to an internal Slack channel to blast the company's new policy.

One Amazon worker in Germany told BI that the return-to-office mandate was a "betrayal" and that he planned to "coffee badge" rather than work in the office five days a week. Another employee told Fortune they were "rage applying" for other jobs.

Popular perk

Hybrid work is generally very popular with employees and has been shown to boost retention and productivity.

Amazon's strict stance on full-time office work is still somewhat of an anomaly within the tech industry. According to research from Flex Index, most tech companies still have a hybrid or remote policy.

Google, Meta, Microsoft, and OpenAI all still operate a hybrid work policy with some mandated office days. At Microsoft, an exec recently reassured staff it wouldn't mandate an office return unless productivity dropped.

"I don't hear about other tech firms following suit, and indeed the broad consensus I hear is this is a great opportunity to pick off some top talent from Amazon," Bloom said.

"In particular, key AI personnel at Amazon are now being aggressively approached as the leading firms in this field — places like Google, Microsoft, and OpenAI — are all hybrid. So this is an incredible opportunity for them to hire from Amazon," he added.

Cost-cutting move

In the memo announcing the RTO policy, Amazon CEO Andy Jassy hinted at plans to reduce managers.

He said the company plans to flatten departments and ask senior leadership teams to increase the ratio of individual contributors to managers by at least 15% by the end of the first quarter of 2025.

Jassy said the move was part of an effort to get the company operating "like the world's largest startup," allowing employees to "move fast" and not waste time with "unnecessary processes."

A copy of an internal document obtained by Business Insider indicates the new plan could result in role eliminations as "organizations may identify roles that are no longer required."

Bloom said Amazon may be shifting from a phase of growth into a phase of consolidation and cost cutting.

He noted that Amazon is a well-organized company that analyzes everything in detail.

"They clearly thought about this long and hard and presumably calculated it was more cost-effective to run a head count reduction via an RTO than active layoffs. This avoids the need for severance pay. The obvious downside of the RTO strategy is a lot of top talent will quit, so it has a growth hit," he said.

Representatives for Amazon did not immediately respond to a request for comment from Business Insider, made outside normal working hours.