How to Prepare Financially for a Layoff in the AI Era

Over the last two years, many companies have laid off employees. Usually, there are two reasons: some companies are struggling financially, while others are cutting jobs to make room for new costs. So what are these new costs?

What Is Causing Layoffs?

In the AI era, companies fall into two groups: those that build AI and those that buy it through corporate subscriptions.

Companies That Build AI

The first group invests directly in AI. Anthropic and OpenAI develop their own AI models. Google and Microsoft do too, and along with Oracle and Amazon, they are also building huge data centers that require enormous investment. That spending now shows up in their results. From April to June 2026, Google reported negative free cash flow of about $5.9 billion, because the $44.9 billion it spent on AI servers and data centers was more than the $39.1 billion in cash its business generated.

Companies That Buy AI Subscriptions

The second group pays for corporate AI subscriptions. Because these companies buy seats in bulk, they usually get a discount, but the cost still adds up. A single business AI seat costs around ₹2,000–2,500 per employee per month; Microsoft 365 Copilot, for example, is listed at ₹2,495 a month in India. With two tools per employee, the bill reaches ₹4,000–5,000 a month, or about ₹50,000–60,000 per employee a year. For a company with 2,000 employees, at ₹60,000 each, that is an extra ₹12 crore a year.

So ₹50,000–60,000 per employee a year is a realistic estimate, and the bill grows further when employees get more tools, such as Copilot, Claude, and others.

This AI spending also comes on top of software that companies were already paying for, such as office suites, cloud platforms like AWS and Azure, and licensed design, sales and marketing, and development tools, most of which are billed per user.

Yet both groups still need to show investors steady profits every quarter. To make room for these new costs, they have to cut elsewhere, and layoffs are one way to do it.

Severance Pay Rules in the US, Europe, and India

How a layoff is handled depends a lot on where you work. European countries tend to have strict government rules on layoffs, while US companies face far fewer restrictions, so layoffs are more common there. On top of what the law requires, many companies offer generous severance packages. Here is how severance works by law in the US, Europe, and India, followed by what top companies have actually paid.

What the Law Requires

India's rules come from the new Labour Codes, in force since November 21, 2025. The 15-days-per-year rule covers "workers," a group that includes engineers who do not supervise anyone. Managers, and supervisors earning more than ₹18,000 a month, receive whatever their employment contract provides. Gratuity, however, applies to every employee with at least five years of service.

What Top Companies Actually Paid

"Reported" means the terms come from internal documents seen by the media, not from a company announcement.

Recent Layoffs Linked to AI (Last Six Months)

AI is now one of the most common reasons companies give for cutting jobs. In the US alone, employers named AI as the reason for 116,175 job cuts from January to August 2026, about 22% of all announced cuts, according to Challenger, Gray & Christmas. Here are the largest layoffs of the last six months in which the company itself linked the cuts to AI.

How to Prepare Your Finances for a Layoff

If layoffs are happening around you, these six steps will help protect your finances:

1. Avoid taking out new loans. If a layoff does happen, you won't be stuck paying an EMI every month with no salary coming in.
2. Keep enough cash for 6 to 12 months of expenses. If you are planning to buy a car or a home, think twice before committing to it now.
3. Save more, and keep your savings safe. Put your money into risk-free instruments that will hold their value even if the market crashes. Track your household expenses, and cut back wherever you can.
4. Invest in yourself. Learn new skills related to AI, as well as skills in fields where human work will matter more in the future.
5. Buy your own medical insurance. Company health insurance covers you only while you work there. Once you leave, you have to buy a policy yourself, so it is better to have one in place before you need it.
6. Rethink your children's education expenses. Many schools and colleges charge very high fees mainly to pay for luxury facilities. Think about what you actually want from your child's education before committing to those fees.

Watch Out for Silent Layoffs

Some companies also carry out silent layoffs, quietly letting people go instead of announcing job cuts, to protect their image and brand. If you sense this happening, have an open, friendly conversation with your manager and HR, and try to negotiate a better exit package if you can.

Sources and References

• Alphabet Q2 2026 earnings release
• Microsoft 365 Copilot pricing, India
• US Department of Labor: the WARN Act
• UK government: redundancy pay
• Germany: severance claim under KSchG section 1a
• India: Ministry of Labour compliance handbook for the Labour Codes
• Challenger, Gray & Christmas job cuts report, August 2026
• Oracle layoffs tied to AI spending, CNBC
• Meta cuts 8,000 jobs, Al Jazeera
• TCS severance of 6 months to 2 years' pay, Business Today

Laws and figures are as of September 18, 2026, and come from official government sources, company announcements, earnings releases, and news reports. Rules change often, so check the official source or ask your HR team about your own case.

This analysis is for educational purposes only and does not constitute investment advice.