IBM has been laying off a substantial number of employees this week and is trying to keep it quiet, sources have said.

One IBM employee has said that IBM Cloud experienced “a massive layoff” in the past few days that affected thousands of people.

“Unlike traditional layoffs, this one was done in secret,” the insider said. “My manager told me that they were required to sign an NDA not to talk about the specifics.”

Multiple posts on layoff-focused message boards and corroborating accounts with other sources familiar with the IT giant’s operations suggest the cuts are large.

Asked to confirm the layoffs, an IBM spokesperson said, “Early this year, IBM disclosed a workforce rebalancing charge that would represent a very low single digit percentage of IBM’s global workforce, and we still expect to exit 2024 at roughly the same level of employment as we entered with.”

IBM’s first-quarter 2024 earnings report said that the mainframe goliath took a $400 million “workforce rebalancing” charge to cover the cost of planned layoffs. That’s after a $300 million “workforce rebalancing” charge in 2023. At the beginning of 2023, IBM announced plans to cut 3,900 jobs.

With about 288,000 employees worldwide at the end of 2023, the “very low single digit percentage” possibilities for 2024 might be 1 percent (2,880 layoffs), 2 percent (5,760 layoffs), 3 percent (8,640 layoffs), or more. Assuming a fixed cost per employee, last year’s charge and job cut disclosure suggests about 5,200 positions would be eliminated with a $400 million charge.

Last year, CEO Arvind Krishna said IBM expected to replace around 7,800 jobs with AI, though no specific time frame was provided. His corporation’s stock price is up 33 percent year to date to $215 a share.

IBM’s spokesperson did not respond when asked to be more specific about the number of layoffs and to explain where new roles were being hired to maintain a flat headcount.

According to the source, the job cuts have been directed mainly at senior-level programmers, sales, and support.

This individual’s job is headed to India, we’re told, reflecting a hiring freeze in the US. But hiring is said to be ongoing in India.

IBM has a history of moving jobs to India.

As with prior layoffs, or “resource actions” to use IBM’s euphemism, we’re told those affected are substantially in the 50-55 age bracket with 20-24 years of seniority.

“It seems exclusively people in L7 and L8 and L9 bands, at the top of the band in payment structure,” the insider said.

Despite numerous past and ongoing age discrimination lawsuits, IBM maintains it does not systematically discriminate on the basis of age.

The UK competition watchdog has officially launched an inquiry into Microsoft’s hiring of staff from start-up Inflection AI, as global regulatory scrutiny of investments by technology groups deepens.

The Competition and Markets Authority said on Tuesday that it had “sufficient information” in relation to Microsoft’s hiring of “certain former employees of Inflection AI and its entry into associated arrangements with Inflection, to enable it to begin an investigation”.

The move to launch a formal merger inquiry comes after the regulator in April invited comments about the Microsoft-Inflection tie-up, as part of broader concerns about dealmaking in the fast-developing AI industry.

The CMA said the deadline for it to escalate its probe to the next level was September 11.

Microsoft said it was “confident that the hiring of talent promotes competition” and that the Inflection deal “should not be treated as a merger”.

The tech group added that it would provide the CMA with “the information it needs to complete its inquiries expeditiously”.

Microsoft, which participated in a $1.3bn funding round for Inflection last year, paid $650mn in March to hire the start-up’s chief executive Mustafa Suleyman, co-founder of Google’s DeepMind, alongside several other team members, and to license its technology.

Inflection was founded as a consumer AI company in 2022, with a chatbot product called Pi. Since March, it has pivoted to selling enterprise AI software to businesses after most of its staff left to join Microsoft.

The move drew scrutiny from regulators and legal experts on grounds that it looked similar to an acquisition by Microsoft but was not subject to formal acquisition rules.

The CMA said in April that it was seeking views on whether the partnerships struck by Microsoft and Amazon with AI start-ups, including Microsoft’s deal with Inflection, “fall within UK merger rules”.

Microsoft and Inflection stressed at the time that the agreement was not an acquisition and that Inflection remained an independent company.

The tie-up is far from the only Big Tech AI deal that has drawn the attention of regulators in the US, EU and UK.

Microsoft this month gave up its seat as an observer on the board of OpenAI while Apple said it would not take up a similar position, amid growing attention by global regulators on investments in AI start-ups.

The European Commission said in June it was exploring the possibility of an antitrust investigation into the Microsoft-OpenAI tie-up after it said it would not proceed with a probe under merger control rules.

The Federal Trade Commission in the US has also begun scrutinising investments made by big tech companies including Microsoft, Amazon and Google into generative AI start-ups.

IBM has been accused of cheating its executive assistants by denying them overtime pay and meal breaks and retaliating against them for accurately reporting their working hours.

A lawsuit filed last Tuesday in New York City alleges IBM broke the federal-level Fair Labor Standards Act and local labor laws by denying non-exempt employees overtime pay, unlawfully making deductions from their wages, and filing inaccurate wage statements.

Such practices amount to wage theft. According to the non-profit Economic Policy Institute, “between 2017 and 2020, more than $3 billion in stolen wages was recovered on behalf of workers by the US Department of Labor, state departments of labor and attorneys general, and through class and collective action litigation.”

Wage theft takes several forms, including minimum wage violations, overtime abuse, off-the-clock violations, meal break violations, illegal salary deductions, tip-related violations, and employee classification issues.

Faced with a series of overtime lawsuits in 2008, IBM reportedly allowed workers to be classified as “non-exempt” – so they were eligible for overtime – while slashing their salaries to compensate for the expense. In 2020, Big Blue was forced to shell out about $9 million in backpay to underpaid IT staff in Australia.

According to a paper by Rutgers researchers that was published in The Economic and Labour Relations Review (July 2021), “Wage Theft in the United States: towards new research agendas,” lax enforcement of labor laws has meant that wage theft is seldom detected and rarely has economic consequences for employers.

“Even if an employer is caught, the penalties are generally not severe enough to change their future behavior,” state authors Joy Jeounghee Kim and Skye Allmang.

The current complaint against IBM in the US was filed on behalf of plaintiff Cheryl Burgard, who worked as an executive assistant at Big Blue for 37 years until she left in February 2023. Her responsibilities included managing executives’ schedules, coordinating their travel, and submitting expenses.

Executive assistants report to IBM’s Global Administration department in Armonk, New York. They’re paid hourly and typically work Monday through Friday, 0830 to 1715, with a 45-minute unpaid lunch break, though it’s argued they often work outside that schedule.

According to the complaint, Burgard “worked off the clock because IBM made clear that it would not allow her to log significant overtime without retribution.”

IBM allegedly required Burgard to log her hours using electronic timekeeping software, and has logged evidence of hours worked using access badge reader data and other electronic interactions with its systems.

Yet, the complaint contends, when managers in IBM’s Global Administration met Burgard, they “made clear that, if she logged her true hours worked, it could cost [Burgard] her job.”

When Burgard complained to Global Administration and Human Resources, she, like other executive assistants, allegedly faced retaliation in the form of negative performance reviews.

IBM, the complaint says, “discouraged [Burgard] from reporting her true hours worked and complaining about nonpayment of her wages by issuing her negative performance reviews which had direct financial consequences.”

And it is further claimed Burgard regularly worked for 30 minutes during her 45-minute unpaid lunch break but had that full period deducted from her paid time.

The lawsuit seeks to be certified as a class action. If approved by the judge, that would allow the attorneys to seek damages for denied wages on behalf of an estimated 400 to 600 executive assistants employed by IBM over the several-year period covered by the applicable statute of limitations.

IBM did not respond to a request for comment.

IBM is asking staff who want to take voluntary redundancy to raise their hand as it embarks on a new round of global job cuts, though roles in Europe and within a handful of departments are expected to shoulder the brunt.

The Resource Action, as Big Blue likes to euphemistically refer to layoffs, shouldn’t be a massive surprise to anyone with more than a passing interest in IBM as it was signaled last month in a Q4 earnings call.

Insiders told us this latest process is not considered to be financial but “transformative,” although IBM was quite clear in January when CFO James Kavanaugh discussed achieving “$3 billion annual run rate in savings by the end of 2024.” This is a third bigger than the initial ambition.

It is understood that 80 percent of the reduction target is aimed at Enterprise Operations & Support (EO&S) and Q2C missions, Finance & Operations (including Procurement, CIO, HR, Marketing & Comms and Global Real Estate).

The European Works Council, one IBMer told us, has informed staff that circa 50 percent of IBM’s reduction goal will impact staffing levels across the European continent.

Meetings between IBM and EWC began this month, with the EWC asked to comment.

As if often the preferred route, IBM is seeking employees that are happy to take voluntary redundancy, rather than ditching someone that doesn’t want to leave.

The sources we spoke to did not reveal the total population in scope for redundancies or the numbers of volunteers being sought. IBM did not confirm the numbers either.

Slovakia, we’re told, is to feel the tightest squeeze with around a third of IBM’s cuts in Europe landing on its International (shared services) Center in Bratislava; the Center in Hungary that supports EO&S/ Q2C, as well as the Finance function in Bulgaria are also going to absorb what our sources described as the most dramatic staff reductions.

We asked IBM to comment on the points raised above, and a spokesperson sent us a statement, insisting this is not a cost saving initiative.

“In 4Q earnings last month, IBM disclosed a workforce rebalancing charge that would represent a very low single digit percentage of IBM’s global workforce, and we expect to exit 2024 at roughly the same level of employment as we entered with. This rebalancing is driven by increases in productivity and our continued push to align our workforce with the skills most in demand among our clients, especially areas such as AI and hybrid cloud.”

IBM reported four percent revenue growth to $17.4 billion for calendar Q4 and operating profit of $3.75 billion. IBM had planned run rate cost savings of $2 billion for the end of this year but stretched that target to $3 billion.

Any financial savings will be used to free up money to invest in technical and industry skills, IBM said.