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Zomato to fire 13% employees, announces salary cut and chalks out survival plan

The news was given to employees in a mail. After announcing the layoffs and pay cuts, Goyal assured about Zomato’s financial stability and said the company had a very generous amount of runway in the bank and will continue to hire people in the product and engineering space

Food delivery platform Zomato’s Founder Deepinder Goyal gave a shocker to its staff on Friday morning, announcing the sacking of 520 employees, or 13% of its workforce, and temporary salary cuts for everyone in the company after its business was hit badly by the Covid-19 lockdown.

Goyal in his mail said, “Multiple aspects of our business have changed dramatically over the last couple of months and many of these changes are expected to be permanent. While we continue to build a more focused Zomato, we do not foresee having enough work for all our employees. We owe all our colleagues a challenging work environment, but we won’t be able to offer that to ~13% of our workforce going forward.”

He said, “Over the next couple of days, GG, MG and I will be getting on video calls with impacted employees to walk them through the next steps and help find them jobs as soon as possible. We are going to assure them that we stand by them, and will financially and emotionally support them to the fullest possible extent.”

The sacked employees will continue to receive 50% of their salaries for the next six months or until they get a new job. They can also continue with the health policy provided by the company until then.

This layoff is the second one in a year. In September last year, Zomato asked over 541 employees to go on leave on the back of automation and use of artificial intelligence (AI) in its operations.

In his email, Goyal also announced a temporary reduction in pay for the entire organisation starting June. Lower cuts are being proposed for people with lower salaries and higher cuts (up to 50%) for people with higher salaries.

The people who have already taken a voluntary cut equal to or more than the proposed temporary reduction in pay will not be expected to take an additional cut. This temporary reduction in pay will also be applicable for 2x ESOP (Employee Stock Ownership Plans) grants just like the earlier voluntary cuts.

“We expect these cuts to be discontinued as soon as the economy starts getting back on track. I foresee (and hope) this to be around six months from now. We will speak about this in more detail during the upcoming global town hall,” wrote Goyal.

The affected people were invited on zoom calls by the leadership team to inform the news. The ones who were spared were sent mails by the HR department of the organisation.

Goyal wrote, “To everyone who is impacted, I assure you that we have already explored every possible option of retaining your roles or creating new roles for you. Also, the short-term cost is not a decision driver here; this will, however, end up making Zomato leaner and improve our chances of success in the long term.”

Explaining the need to prepare for the future, Goyal said, “Covid-19 has been a black swan event for the world economy, and we do not yet know if we have hit the global minima in this journey with the virus. What we have seen so far might just be the local minima, and the worst might be around the corner. Therefore, we need to make sure that we preserve as much cash as possible to weather the storm if the business environment gets worse or continues to be the same for the rest of the year or more.”

Even after announcing the layoffs and pay cuts, Goyal further wrote that Zomato’s burn rate is significantly down from pre-Covid levels. “We have enough capital to continue growing our business – are financially stable and have a very generous amount of runway in the bank (which is continuing to improve as we bring our burn rate down). We remain committed to growing towards our mission at the same pace as before. We will continue to hire people in areas where we need them the most – primarily in product and engineering,” he added.

Emphasising the need to redefining business strategy, Goyal said, “There’s no going back to the ‘normal’ – all we should focus on is building for the ‘new normal’. Considering what we know at this point, the idea is to make a complete shift towards being a transactions first company, focusing heavily on a small number of large market opportunities in the food value chain.”

Zomato also started delivering groceries to home when the lockdown started and is already delivering across 185 cities in India.

“We see long-term potential in this (grocery) segment,” Goyal said in the email. “Grocery also fits perfectly into our vision of better food for more people.”

The brand also launched a food delivery business in Turkey and signed more than 25,000 restaurants globally for contactless dining. It launched takeaway in Australia, New Zealand and Portugal to support restaurants and customers when dining out was completely shut in these markets.

Zomato’s rival Swiggy had also decided to lay off approximately 900 employees from its cloud kitchen business after being affected by the coronavirus pandemic.

Many online business and startups including, Acko, Fab Hotels, Shuttle, Airbnb, Uber and others have asked its people to leave and take salary cuts in the last few months.

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