Zenefits shows the harsh reality behind Trump's effort to create more US jobs

David Sacks, CEO of Zenefits.
Source: Zenefits

Don't expect any joint press conferences between President Donald Trump and Zenefits executives anytime soon.

The maker of human resources software, whose outgoing CEO David Sacks is good friends with Trump adviser Peter Thiel (they co-founded PayPal and Thiel is a Zenefits board member), announced on Thursday that it's building engineering teams in Vancouver and Bangalore — while eliminating 430 jobs in the U.S.

The expansion in Canada and India will "better complement the already established and proven team we have in San Francisco," Zenefits wrote in an e-mail to employees.

BuzzFeed first reported on the memo. The 430 jobs represent about 45 percent of the company's workforce and the cuts will be in San Francisco and Tempe, Arizona. Zenefits is also moving its operations headquarters to Tempe.

A company spokesperson said in a follow-up e-mail that Zenefits is not eliminating U.S. jobs to hire elsewhere, but is restructuring the company so that "once we can hire again, we'll hire where we have operations in the U.S., Vancouver and Bangalore."

It turns out that Trump's demand that companies "buy American and hire American" is an expensive proposition, one that's too costly for emerging start-ups. Zenefits was among the many Bay Area software businesses that raised a ton of cash at sky-high valuations in recent years before being forced to downsize. The company is now about a third of the size it was a year ago.

While Zenefits is a tiny fraction of the size of tech companies like IBM and Intel, which have announced big hiring plans tied to Trump's presidency, the outsourcing is notable given Sacks' close ties to Thiel.

In fact, as reports were swirling in December of Sacks' imminent departure from Zenefits, there was speculation that he'd be helping Thiel on the Trump transition team. He denied that in a tweet on Dec. 11.

Sacks tweet

Jay Fulcher, who took over as CEO this week, told employees that, "today's action aligns our costs more closely to our business realities and gives us the runway we need to build the business properly for the long term."