Business that is a nightmare for Krakow. Why are there so many mass layoffs there?

Another three companies have announced their intention to carry out group layoffs in Kraków – this time 271 people will lose their jobs. In total, since the beginning of the year, Kraków companies have announced the layoffs of 1,677 employees – reports “Dziennik Polski”.

Mass layoffs in Krakow

The Municipal Labor Office in Krakow is receiving information from more companies that want to conduct group layoffs. “Dziennik Polski” does not provide the names of the companies, but it is known that they operate in retail (108 people), the software sector (37 people) and are involved in “other activities” (126 people).

The newspaper has established that one of them is the Alma delicatessen chain – the last store under the banner of this once popular brand was closed in April.

Business Insider reported in May that Kraków is at the top of the infamous list summarizing the first quarter of 2024 in terms of mass layoffs. In January and February, almost 1,000 people lost their jobs, which is more than in the whole of 2023. At that time, there were 954 people on the counter.

The report of the Municipal Labor Office in Krakow indicates that 986 people lost their jobs in the capital of Małopolska in group layoffs in January and February. Warsaw came in second place — 627 people, and then Olsztyn — 447 people.

The business that will ruin Krakow

The City Employment Office analyses the reasons why the capital of Małopolska is the leader in the intensity of group layoffs. Apart from the typical reasons, such as the growing costs of companies and the need to find savings (and as bad as it sounds, employee salaries are the largest cost for employers), it may be significant that Krakow is home to a large number of shared/business service centres, i.e. offices that provide auxiliary services, including accounting services, human resources management, payroll settlement, and IT services for companies operating on other markets, including international ones. Although the largest number of employees employed in such organisations found employment in Warsaw, the sector is developing most dynamically in Krakow.

According to the ABSL report “Modern Business Services Sector in Kraków 2021”, since 2016, 79 new centers have been created in Kraków, which have contributed to the creation of 8.9 thousand jobs. This means that in just four years, employment in the modern business services sector in the capital of Małopolska has increased by 61% – informs the LoveKraków website.

Corporations want cheap and good. The latter is hard to come by in Krakow

In 2021, a total of 82.6 thousand people worked in centers located in Krakow (nearly 4.5 thousand more compared to 2020). The majority, as much as 88 percent of jobs, were created in centers owned by foreign entities.

As we have already mentioned, such companies serve corporations operating not only in Poland but also abroad. The choice of Krakow was dictated by several reasons, including the large number of graduates who graduate from Krakow universities every year, the existence of a large airport – but also the costs of doing business that are lower than in Germany or the Netherlands. However, the costs of doing business in Poland, and especially in large cities, are rising, which encourages corporations to look for cheaper places where they can carry out accounting or HR activities.

This does not necessarily mean liquidating the entire branch of the business services center, but reducing its department by transferring some tasks to Romania or India. This tendency to “optimize costs” will result in further layoffs.