Redfin announced Tuesday in a U.S. Securities and Exchange Commission filing that it’s furloughing 41 percent of its agents — nearly 600 total agents, based on 2018 agent count — until Sept. 1, along with some support staff, due to the market slowdown in the wake of a global pandemic. A total of 7 percent of the company’s staff is being laid off, according to the filing.
“Forty-one percent of our wonderful agents are leaving Redfin this Friday, together with the wonderful coordinators, recruiters, renovators and others who support those agents,” Redfin CEO Glenn Kelman said, in the filing.
“The great majority will go on furlough until September 1, with a transition bonus and health-care benefits through the summer,” Kelman added. “But we’re also asking some to leave for good, including new hires who hadn’t met a customer or completed their training before our offices closed a month ago.”
In total, the company is reducing its overall number of employees by seven percent. Redfin expects the workforce reduction to be completed by the end of April with the pre-tax charge for one-time termination benefits and severance to cost the company between $2.9 million and $3.3 million.
Kelman cited the federal stimulus package as a reason to furlough and layoff employees at this time.
“We’re relieved that the people who have to leave Redfin will also get more support,” Kelman said. “We decided on this large-scale furlough because fewer people are buying and selling homes, but another factor was the federal government’s $600 weekly contribution to each person’s unemployment insurance.”
Kelman estimated that approximately 75 percent of the furloughed agents live in states that will allow them to earn more in unemployment insurance than they would from Redfin. The estimation assumes that every state participates in the CARES Act, but doesn’t account for those who may not qualify for unemployment payments.
“No matter how much unemployment insurance the government pays, letting people go, even temporarily, is an unnatural act that we hate having to do,” Kelman said.
Redfin is retaining most of the employees who build technology and programs with a temporary salary cut of 10 to 15 percent and cancellation of bonuses for the year. Most of the total layoffs are coming from agent support staff.
Redfin had previously announced it was going to temporarily increase the fixed portion of its agents’ pay amid the coronavirus-fueled market slowdown. In an effort to offset those costs, Kelman elected not to take a salary for the rest of 2020 and the company’s management team is forgoing 2020 bonuses.
The company is sticking to its commitment to pay its remaining agents a higher base salary, according to Kelman.
“It’s hard for any business to prepare for an event of this society-shaking magnitude, but we want to be careful not to conflate our short-term and long-term prospects,” Kelman said. “Our short-term prospects are glum. But our long-term competitive position is strong. Housing isn’t a fad or a luxury good; demand for a basic need like shelter can only be deferred, and only for so long.”
In late March, Redfin reached an agreement to sell a $110 million stake in capital stock to Durable Capital Partners, a late-stage venture capital firm based in Maryland, the brokerage announced Monday.
Redfin has survived major slowdowns and mass layoffs in the past, albeit at a time when the company was much smaller and still privately held. In October 2008, at the height of the housing crash, Redfin laid off 20 percent of its employees.