British American Tobacco said on Monday it will cut 9,000 jobs—about one-fifth of all its workers worldwide. Some jobs are being eliminated entirely. Others are being handed over to outside companies that will do the work instead, according to The Guardian.

To break this down: 5,500 people are losing their jobs permanently. Another 3,500 will work for contractors—outside companies hired to handle things like IT support, accounting, or shipping. These contractors can often do the work cheaper because they handle the same jobs for multiple clients at once.

Why is BAT doing this now? Part of it is automation. Artificial intelligence and software can now handle work that once required many people—things like managing finances or checking that products meet regulations. This is spreading beyond tech companies into older consumer goods businesses.

But there's a bigger reason. Fewer people are smoking cigarettes in wealthy countries. That trend has been going on for over a decade and isn't stopping. BAT has tried to adapt by selling alternatives like heated tobacco devices and vaping products, but these don't make as much money per unit and are harder to distribute. The steady cash flows BAT once relied on—money it uses to pay shareholders and cover debts—are shrinking. When profits are getting squeezed, cutting costs feels urgent.

There's something worth paying attention to here. When companies shift work to outside contractors, workers lose certain protections. Employment rules, job security, and benefits all change. Regulators in the UK and Europe have started watching for this exact practice, because it can make workers worse off even if they technically still have a job.

BAT's investors—many of them people or pension funds that own the stock because it pays a high dividend—want the company to protect the cash it pays them. The worry is whether cutting jobs will be enough if cigarette sales keep falling.

Timing matters too. The UK just raised taxes on companies that employ people directly. That makes hiring contractors or automating tasks even more attractive from a cost perspective. Since BAT is based in London, these changes directly hit its bottom line.

The biggest risk is subtle. When companies make big cuts, they sometimes accidentally destroy knowledge and skills they'll need later. For BAT, losing expertise in product development and regulatory approval could be costly—these are the exact skills needed to successfully shift to new products. If the cuts are spread evenly across the company instead of targeting work that machines can handle, BAT could hurt its own ability to execute its strategy. Balancing immediate cost savings with the ability to compete in the future is the real challenge ahead.