Elon Musk’s Latest 'Return-to-Office' Memo May Force Tesla Employees to Resign, 40 Percent Expected to Quit

Elon Musk needs to cut one in ten jobs at Tesla. Some may already have their eye on the exit.

The Tesla chief executive's intentions, conveyed in an internal email seen by Reuters, are rooted in what he described as his “super bad feeling” about the US economy.

Some of the nearly 100,000 people employed at the electric carmaker may already be considering their options after Musk issued them with a return-to-office ultimatum this week.

In an email sent to staff Tuesday night, Musk threatened to fire anyone who did not work in the office 40 hours a week, a sharp contrast to flexibility offered by Big Tech companies that compete for the same talent pool.

The office edict, on top of a steep drop in Tesla's share price this year – partly due to Musk's costly pursuit of Twitter – and his public alignment with the Republican party are a toxic mix for some staff.

"Tesla is kick-starting its own local Great Resignation," said Stanford University economics professor Nicholas Bloom, who predicted that 60 percent of employees would return to the office full time, about 10 percent would quit, and about 30 percent would look for another job.

Tesla did not immediately reply to a request for comment.

Some tech companies, sensing an opening, were quick to swoop.

Scott Farquhar, Australia's third-richest man and the co-founder of software maker Atlassian, tweeted about plans to expand and offer flexibility. "Any Tesla employees interested?" he added.

In the wake of the COVID-19 pandemic, more and more tech workers, used to working from home or hybrid policies, are refusing to come back to the office full-time.

One former Tesla engineer told Reuters he recently took a job at Alphabet because of the lack of work-life balance, including pressure to come into the office during the pandemic. At Google, he has to come to office only three times a week, with some of his team members working remotely, he said. He said his friends working from home "are not less productive, but significantly happier." Another former Tesla engineer said he had been under pressure to work in the office during pandemic in 2020 and got COVID twice - before moving to Apple.

BIGGER STOCK COMPENSATION

The threat of layoffs and the return-to-office order come as Tesla engineers are watching their stock-based compensation drop. Tesla faces some of the same problems assailing other companies, such as China lockdowns.

But investors also are concerned that Musk's $44-billion (roughly Rs. Rs. 3,41,913) pursuit of Twitter is distracting him, despite Musk's contention that he spends relatively little time on it.

Tesla stock fell 9 percent on Friday after Reuters published his staff cut plan and Twitter said the Musk acquisition had passed US antitrust review. The stock had already been down about 30 percent since Musk announced his purchase of shares in early April, roughly double the drop of the Nasdaq index.

"If this is sustained, they will absolutely have a retention problem. You've got two things happening. You've got Elon Musk saying things that are controversial and don't appeal to everybody. And you've got the stock price taking a big hit," said Michael Solomon, founder of compensation negotiation advisory service 10x Ascend.

Stock options are a bigger portion of executive compensation at Tesla than at its peers, the company said in its securities filing this year. When shares don't go up, that part of compensation can be worthless.

Tesla employees get annual bonuses in the form of stocks, and generally receive lower cash salaries than peers at big tech companies, according to former and current employees and data provided to Reuters from job sites Blind and Glassdoor.

Tatiana Becker, who runs NIAH Recruiting, a recruiting firm for startups, recently did an email marketing campaign to Tesla employees and received responses from 14 percent, compared with a normal top rate of 10 percent.

MUSK BRAND

To be sure, Musk's brash personality has helped build the Tesla brand, allowed it to expand without marketing, and given many employees a sense of mission tied to the man and his climate goals.

Long hours and unreasonable working conditions are the norm for some, a former Tesla engineer said: "It's how we're wired."

And other tech companies are cutting jobs or slowing or pausing hiring amid weakening demand, potentially reining in some Tesla staff's willingness to jump ship.

But Musk's recent embrace of a new partisan political identity is off-putting to some employees, particularly liberal tech workers in Silicon Valley.

"He's a very polarising guy. You either love the guy or you hate the guy," said Jason Stomel, founder of tech talent agency Cadre.

"Some people are huge fans, and they'll do anything to work for one of his companies. And others will say, like, I don't really agree with his way of running the company."

The billionaire has tapped his large Twitter following to attack Democratic lawmakers, used his bid for the microblogging platform to champion free speech, including a pledge to restore former president Donald Trump's account, and he has said he will vote Republican.

"There are people for whom this is very distasteful," recruiter Solomon said. "These are people who have a lot of choices about their employment options."

Many Tesla employees will wait for the stock to recover, said a former Tesla manager, who described stock awards as "golden handcuffs" that keep staff from leaving. "But if they think the Tesla share price will remain low, then they are more likely to leave: their big bonus isn't so big anymore."

© Thomson Reuters 2022