Payments company Block is reportedly slashing its workforce by up to 10 percent after admitting its growth is ‘not sustainable.’
The firm, owned by Twitter founder Jack Dorsey, famously runs the platform Square which powers many iPad checkout screens at cafes and bars that ask customers to tip. It earns money every time somebody adds gratuity – though a representative previously told DailyMail.com the income generated from tips equates to ‘mere cents.’
Despite its profits increasing three-fold in the last four years, Dorsey circulated a note to staff last week claiming Block’s number of employees was not reflected in its customer growth.
‘It’s not sustainable. And Square’s number of people has far outpaced our growth and performance,’ he wrote in a note seen by Business Insider.
Twitter founder and Block CEO Jack Dorsey warned employees of job cuts in a note sent last Thursday
Block owns digital Point of Service (POS) system Square which powers many iPad checkouts that prompt users to tip. Its profits tripled between 2018 and 2022
‘In fact, I believe it’s slowing us down and frustrating everyone. Which is not fair to you all, or our customers.
‘So, Square is going to be smaller than we are today by the end of next year.’
He added executives would not ‘take a single action, but rather look critically at everything we’re doing and act thoughtfully.’
According to Insider, staff were told in a separate internal company announcement that headcount would shrink by around 10 percent in coming months.
A person familiar with the matter told the outlet this would bring down the number of employees to around 12,000 by next year.
Block had just over 12,400 employees at the end of 2022, a filing with the Securities and Exchange Commission shows. In an earnings call, CFO Amrita Ahuja was reported by Insider as saying the current headcount is just over 13,000 people. The firm will also put in place a hiring cap.
Square was founded in 2009 by former Twitter CEO Dorsey and Jim McKelvey. The men have a net worth of $4billion and $1.3 billion respectively, according to Forbes.
In 2021 the company was rebranded as Block – but the arm which controls its digital Point of Service (POS) systems has maintained its original name.
Shoppers might recognize its blue-and-white screens on iPad and iPhone checkouts which asks them how much they would like to tip, with options generally beginning at 15 or 18 percent.
In the third quarter of this year, Block made $1.9 billion, up 21 percent year on year, according to its company reports.
Much of its revenue is generated by Square which earnt the company $899 million in the quarter – up 15 percent compared to the same period in 2022.
Shoppers might recognize its blue-and-white screens on iPad and iPhone checkouts which asks them how much they would like to tip
Square’s accounts claim it processed $46.22 billion worth of transactions in the quarter of the year – the equivalent of $513 million a day.
The business’ rapid ascent as a leading digital POS had been well documented. Between 2018 and 2021, its annual profits tripled from $1 billion to $3 billion.
Historically tips were only expected at restaurants and bars – or other venues where people were waited on by servers.
The trend was in part sparked by the pandemic which saw stores reluctant to accept cash and in need of a quick and easy digital alternative.
But recently more and more stores and coffee shops have started to implement iPad POS machines which ask customers if they wish to add gratuity before they complete the transaction.
And customers have complained of feeling ‘guilt tripped’ into tipping by the digital prompts.
Earlier this year Square told NBC news that the frequency of tipping in quick-service restaurants – including coffee shops and fast-food chains – rose 16 percent in the last quarter of 2022 compared to the same period a year earlier.
According to Block’s website it takes 2.6 percent and 10 cents on a contactless or ‘swipe’ transaction.
For a keyed-in transaction – when a customer manually enters their card information – it will charge a 3.5 percent fee plus 15 cents.
If an employee receives a tip, it adds to the transaction value – meaning Square claws back a bigger share of the money.
Square told DailyMail.com earlier this year it would be ‘inaccurate’ to say that increased tipping is the reason for its explosion in profits.
A spokesman added that merchants can opt out of including the tipping option in their system.
Jack Dorsey’s full memo sent to Block staff
As I said in my note to Block, the growth of our company has far outpaced the growth of our business and revenue.
It’s not sustainable. And Square’s number of people has far outpaced our growth and performance. In fact, I believe it’s slowing us down and frustrating everyone. Which is not fair to you all, or our customers.So, Square is going to be smaller than we are today by the end of next year. We are going to do so through performance management, scoping our work, and restructuring to remove duplication and redundancy. Therefore we will not take a single action, but rather look critically at everything we’re doing and act thoughtfully.
I also believe it’s important to be upfront and transparent about all this, so you all can make your own decisions if you need to. You may not be up for the uncertainty or shrinking our team, and want to leave. That’s perfectly reasonable. But I’d rather us provide the information than to work secretly in the dark.
Everything square-core and I do will be done with transparency and straightforward reasoning you’ll have access to. You may not agree with our decisions, but we’ll do our best to explain why we believe they are right.
Thank you all,
jack
