As Afterpay dismisses nearly half its workforce, is AI coming for our jobs too?

Below is a Rachael Judge's fortnightly opinion column that was published in BusinessDesk on 6 March.

Last week, Chief Executive of Afterpay’s parent company ‘Block’, Jack Dorsey, announced on X that the company was reducing its workforce by almost half, cutting around 4000 jobs. Typically, when companies are in significant distress, we would expect to see mass redundancies. However, Block is profitable and has grown significantly.

So, why the job cuts?

Dorsey has cited AI as being the driving force, stating that “a significantly smaller team, using the tools we’re building, can do more and do it better. And intelligence tool capabilities are compounding faster every week.”

The announcement may have come as a particular shock for Afterpay’s Australian employees, who had reportedly attended an “upbeat” company retreat in Victoria only two days before the announcement.

Afterpay is far from an anomaly

Across the technology, finance and professional service sectors, many organisations are citing AI-driven efficiencies as a rationale for significant workforce reductions. Last week, WiseTech Global (a software logistics firm) also announced that it will be cutting around 2,000 jobs across 40 countries as part of a “deliberative AI transformation journey”. Earlier this year, JP Morgan Chase announced that roles were being displaced by AI, but in a much more positive move for employees, spoke about its focus on redeploying its people into other roles.

Has this trend reached New Zealand yet?

As an employment lawyer, I am finding my clients are increasingly making changes to their structures and operations due to the impact of AI. In New Zealand, we tend to follow international trends and as AI keeps improving, jobs are likely to become more at risk. However, it will not always be as simple as saving someone’s salary cost by outsourcing to AI. Sophisticated AI systems come at their own cost, and a level of human input and checking is often still required. Pleasingly, we are also hearing that many of our clients are taking proactive steps to invest in capability uplift in an effort to retain employees through these changes.

In a New Zealand context, there is a strong onus on employers to justify any decision to make a role redundant. Therefore, employers proposing to replace jobs with AI will need to be able to prove that their decision was a fair and reasonable one in all of the circumstances. If they are citing cost savings or efficiencies, they will need to be able to substantiate those claims.

If AI does come for your job, what are your entitlements?

Afterpay employees reportedly received generous severance packages, with a starting point of five months’ pay. This may have helped to cushion the blow upon their return from the company retreat.
In New Zealand, employees do not have any statutory entitlement to redundancy compensation. Larger companies and those with a union presence will often offer contractual redundancy compensation but this is not a standard entitlement in employment agreements. Rather, the standard entitlement is notice and the payment of any accrued holiday pay upon termination of employment.

What can you do if you don’t agree with your dismissal?

In general, employees have a right to challenge their dismissal for redundancy if they feel it was unjustified. Dismissals could be found to be unjustified due to the process followed, the substantive rationale behind the redundancy, or due to a failure to redeploy a redundant employee into a suitable vacant role. Even where there is a solid rationale for a restructuring, employers still need to jump through several hoops to get things right.

There is a new exception for ’high income’ employees. Recent amendments to the Employment Relations Act 2000 have introduced ‘high income threshold’ provisions, which remove the right of employees earning $200,000 NZD or more per year from bringing personal grievances for unjustified dismissal. They also remove the requirement that employers follow ‘good faith’ processes in relation to these dismissals. Therefore, in future, employees earning over the threshold could be replaced by AI and their employer would not even need to tell them the reason for their dismissal.

There is a 12-month transition period before these provisions will apply to existing employees. However, the provisions currently apply to any new employees (unless the parties contractually agree to any alternative arrangements).

Key considerations for employees

Uncertain economic environments, compounding AI capabilities and the shifting nature of work in knowledge-based industries is likely to mean AI-driven layoffs are only going to become more common. In those circumstances, a few considerations to keep in mind are:

Understand your employment agreement and the redundancy provisions, including, whether you may be entitled to redundancy compensation.
When accepting a new role above the $200,000 NZD threshold, consider whether to negotiate opting back into the unjustified dismissal protections (or negotiating an alternative arrangement). It is important to bear in mind that this threshold is based on the total remuneration package (including bonuses and commissions) rather than just the base salary.
If you are in a role that is at high risk of automation, pivot early and before AI catches up to you to ensure you are developing transferrable skills.