Citi can’t risk laying more people off. So it will cut pay and scrap promotions until they leave willingly

One of the more interesting labor trends of 2024 has been companies attempting to cut costs by decreasing headcounts without actually laying anyone off. Back in September, for example, Amazon’s CEO Andy Jassy announced that, starting in January 2025, all employees would have to return to the office for a full five days per week “the way we were before the onset of COVID.” However, this return-to-office mandate didn’t necessarily apply to all employees. Workers who had already received approved Remote Work Exceptions could keep their perk:

“Before the pandemic, it was not a given that folks could work remotely two days a week, and that will also be true moving forward—our expectation is that people will be in the office outside of extenuating circumstances (like the ones mentioned above) or if you already have a Remote Work Exception approved through your s-team leader.”

At the time, I noted that while Jassy said the return-to-office move was rooted in improving company “culture,” a word that was used 11 times, another goal was likely resignations. Jassy also noted he wanted the ratio of individual contributors to managers to increase by at least 15% by the end of Q1. There are two ways to accomplish this: gain contributors or lose managers. To quote myself:

“The simplest way to remove managers is through layoffs, but layoffs create poor optics. Mandating a five-day return-to-office will naturally cause some employees to lay themselves off, providing the desired outcome without the unpleasantness of job cuts.”

Tell everyone to come back to the office (except those who don’t have to come back to the office, of course), and some folks will leave on their own volition. Bureaucracy reduced. Yesterday, the Financial Times reported something similar going on at Citi: the bank has reduced the number of employees that will receive promotions and raises by 75% this year:

“Managers have been told that as many as 2,000 Citi employees could receive a bump to their pay and title in the next month, down from about 8,000 in previous rounds, four people familiar with the decisions said, cautioning that those decisions are not final.”

Additionally, some employees may even face pay reductions:

“Managers have been told to assess staff and decide whether some should be moved to lower tiers, resulting in lower pay, said one person familiar with the matter.”

The reduction in promotions coincides with a slowdown in layoffs. As noted in the FT piece, at the end of last year, Citi planned to layoff 20,000 employees, but job cuts flattened out at 10,000, with CFO Mark Mason citing “regulatory scrutiny” as a factor holding back more cuts.

What was this “regulatory scrutiny”? The bank has struggled to adequately train employees in risk, compliance, and data roles. US bank regulators fined Citi $136 million in July 2024 for making “insufficient progress” toward fixing its own internal data-management issues that led to it accidentally wiring $900 million to creditors in 2020. For context, in 2020, Citi was serving as an administrative agent for cosmetics company Revlon as it navigated bankruptcy. In an attempt to make an interest payment to creditors, Citi accidentally wired Revlon’s creditors $900 million, 10x more than it intended, paying off Revlon’s entire 2016 loan in the process. The cause of the mishap? A Citi employee fat-fingered the wrong loan amount to pay. Citi was fined $400 million by regulators at the time, and it took the bank two years of legal battles to get all of its money back from creditors.

Per an internal analysis reported on by Reuters, Citi is grappling with “insufficient compliance risk management skills,” and the bank’s initial job cuts may have hindered its efforts to address this problem.

Basically, Citi keeps getting fined by the government for poor internal risk management, and it may have laid off workers in critical departments related to its poor internal risk management, and in September, its CFO hinted that all the regulatory problems are impacting its ability to make further layoffs.

But Citi also wants to reduce headcount costs (hence its initial plan to cut jobs). So when you want to reduce headcount costs, but you can’t reduce headcount, your only solution is to pay your headcount less, which, I would imagine, has a side effect: some disgruntled employees will probably leave. Layoffs, without having to do layoffs.