Underperforming staff at accounting software company Xero will be offered an immediate voluntary severance package instead of a performance improvement plan as the ASX-listed tech giant tries to keep pace with the AI revolution.

Under an “Opt Out Program” revealed to Xero employees last month, workers who are not performing well will be given a choice between severance pay or a 30-day improvement plan, where they may still be fired afterwards.

Xero ranks its employees’ performance across five categories: exceptional, strong, good, moderate and below expectation.

The new plan will see all workers whose performance has been graded as ‘below expectation’ offered the severance pay, along with those rated as ‘moderate’ in two annual reviews in a row.

‘Raising the bar’

Xero has more than 5,000 employees in offices across New Zealand, Australia, the United Kingdom, the United States, Canada, South Africa and Singapore.

It was founded in New Zealand and is still based there but is listed on the Australian Stock Exchange.

Xero chief executive Sukhinder Singh Cassidy told staff about the changes in a company-wide Slack message, as reported by Forbes.

“As per the performance process, the Opt Out Program will be offered to 100 per cent of the Below Expectation cohort, as an alternative to the 30-day Performance Improvement Plan,” Cassidy said in the message to staff.

“As AI changes how work gets done, we have the chance to redefine how small business finance works.

“To capture that opportunity, we need to keep raising the bar on the customer impact we deliver, and how we execute internally.”

Xero CEO Sukhinder Singh Cassidy sold off all her shares in the company. Photo: Supplied

Along with the plan for underperformers, Xero workers in the ‘exceptional’ and ‘strong’ categories will receive stronger annual salary review outcomes, and more equity grants as a reward.

“We’ve spent the last two years-plus talking about the need to build a high-performance culture alongside our purpose and passion, and putting in place the frameworks and reward systems to do so,” Cassidy said.

“And when I say we, I mean all of us.”

The Saaspocalypse

A spokesperson for Xero confirmed the new policy.

“Like any company that cares about doing great work, we have ongoing performance and development conversations with our people,” the spokesperson said.

“That is a normal and continuous part of how we operate and how we support our teams.

“We recognise strong performance, we support people who need it, and we treat everyone with care and respect.”

Xero has been battling the so-called “SaaSpocalypse”, which has seen the mass sell-off of some tech stocks due to fears over the automation of their products attributed to AI.

Xero’s stock price has taken a battering in the last year, dropping by 50 per cent since its peak in June last year.

The company’s market capitalisation now sits at $11.83 billion.

Its shares tumbled a further 3 per cent after it was revealed that Cassidy had recently sold all her shares in the company, worth $2.2 million.

This amounted to all the CEO’s ordinary Xero shares.

Cassidy still holds more than 171,000 restricted stock units and more than 1 million unlisted options.

This comes at a time when efforts are being made to win shareholder support for a new pay deal for the CEO, which is less based on the company’s share price performance.

Xero laid off 800 staff in 2023, at the time accounting for about 15 per cent of its total workforce.

Tech giants around the world have announced significant layoffs this year, with many attributed to an increased use of AI and the impact of this new technology on the organisation’s product.

According to layoffs.fyi, there have been just under 121,000 tech workers laid off across 233 tech companies around the world so far this year.

Despite many lay-offs being blamed on AI, a recent government report found that there is “no evidence to date of broad labour market upheaval” caused by generative AI.